Business / No need for blanket extension of loan moratorium till December: SBI chief

New Delhi: The country’s largest lender — State Bank of India — is not ‘overworried’ about an increase in bad debts on account of the pandemic and the subsequent loan repayment relief given by the Reserve Bank of India (RBI).

Speaking at a panel discussion in the banking and economics e-conclave organised by the bank, its chairman Rajnish Kumar said that a further blanket extension of the moratorium may not be required.

He pointed out how there are signs of recovery in June and said that only some sectors will continue facing a lot of stress going forward.

The nationwide lockdown ended in May with the unlock phase beginning in June.

Any further extension of the moratorium by the RBI will need to be sector specific and based on the levels of stress, Kumar said.

The Reserve Bank of India had announced a three-month moratorium in March until 31 May. However, the central bank had further extended the moratorium after the lockdown lasted longer than anticipated.

The moratorium now ends on 31 August and there have been demands for a further extension or a one-time loan restructuring by certain sections of businesses.

‘Softer interest rate regime here to stay’

Kumar said the 6-month moratorium is akin to a restructuring.

The SBI chairman pointed out that many corporates who had availed of the moratorium had done so to preserve cash for the future and not because they were unable to make the repayments.

Kumar also said that a softer interest rate regime is here to stay but pointed out that this does not necessarily mean an increase in demand for bank loans.

With the RBI cutting interest rates by more than one percentage point over the last 3 months, banks have reduced their lending rates. However, a risk-aversion among both companies and banks has meant that the credit offtake has been muted.

Data with the Reserve Bank of India showed that bank credit growth decelerated to 6.8 per cent in May from 11.4 per cent a year ago. Of this, credit growth to industry decelerated to 1.7 per cent from 6.4 per cent.

Going ahead, Kumar stressed the need for increased spending on infrastructure and construction pointing out that these segments can help revive the economy and are also major job creators.