Apart from announcing liquidity measures in its Seventh Bi-monthly Monetary Policy Statement for 2019-20, the Reserve Bank of India (RBI) also took steps to mitigate the burden of debt servicing brought about by COVID-19 disruptions. The steps include moratorium on term loans, deferring interest payments on working capital and easing of working capital financing.
Other measures are deferment of implementation of the net stable funding ratio and the last tranche of the capital conservation buffer.Apart from announcing liquidity measures in its Seventh Bi-monthly Monetary Policy Statement for 2019-20, the Reserve Bank of India also took steps to mitigate the burden of debt servicing brought about by COVID-19 disruptions. The steps include moratorium on term loans, deferring interest payments on working capital and easing of working capital financing.#
“Such steps will go a long way to prevent the transmission of financial stress to the real economy, and ensure the continuity of viable businesses and provide relief to borrowers in these extraordinarily troubled times,” RBI governor Shaktikanta Das said in his statement.
All commercial banks, including regional rural banks, small finance banks and local area banks, co-operative banks, all-India financial institutions, and non-banking finance companies (NBFCs), including housing finance companies and micro-finance institutions, are now permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1.
In respect of working capital facilities sanctioned in the form of cash credit or overdraft, lending institutions are permitted to allow a deferment of three months on payment of interest in respect of all such facilities outstanding as on March 1. The accumulated interest for the period will be paid after the expiry of the deferment period, the RBI said.
The moratorium on term loans and the deferring of interest payments on working capital will not result in asset classification downgrade.
In respect of working capital facilities sanctioned in the form of cash credit or overdraft, lending institutions are allowed to recalculate drawing power by reducing margins or by reassessing the working capital cycle for the borrowers. Such changes will not result in asset classification downgrade, RBI clarified.
The moratorium on term loans, the deferring of interest payments on working capital and the easing of working capital financing will not qualify as a default for the purposes of supervisory reporting and reporting to credit information companies (CICs) by the lending institutions. Hence, there will be no adverse impact on the credit history of the beneficiaries, the governor’s statement added.
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