Double moratorium period to 6 mths, provide credit guarantee for MSME loans: IBA to RBI

Indian Banks' Association (IBA) has submitted a list of recommendations to both the government and the Reserve Bank of India (RBI) to ease the financial burden faced by various sectors due to the outbreak of coronavirus pandemic.

Some of the key recommendations included blanket credit guarantee for MSME loans, one-time loan restructuring for sectors hit hard by COVID-19 and raising of moratorium and relief for the NBFC sector, sources said.

As per the RBI's norms, restructuring of loans is prohibited and resolution of default cases are dealt as per the Insolvency and Bankruptcy Code (IBC).

Based on the representation made by various industry associations, a detailed and comprehensive list of suggestions have been submitted to the government and the RBI for addressing problems faced by various sectors including MSME in general and banking sector in particular, sources said.

It is for the regulator and the government to take an informed decision on those suggestions depending on their assessment and keeping in mind prudential norms, sources added.

However, the IBA in its meeting last week was of the view that this is an extraordinary situation and response to this should be extraordinary.

Bankers believed that some safety net has to be created for both industry and banks for survival first, sources said, adding, revival would follow.

Various estimates indicate a drastic reduction in GDP growth forecast for the current fiscal due to the impact of COVID-19 and consequent lockdown.

As per the World Bank's latest assessment, India is expected to grow 1.5 per cent to 2.8 per cent. Similarly, the IMF projected a GDP growth of 1.9 per cent for India in 2020, as the global economy hits the worst recession since the Great Depression in the 1930s.

Earlier this month, SBI Chairman Rajnish Kumar had said that the IBA will request for raising the loan moratorium period from the existing three months to 5-6 months depending on the evolving situation.

Kumar, who is also the chairman of the IBA, had said that there was also demand for government guarantees against loans to certain risk-prone sectors to revive credit flow in the economy post lockdown.