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Letter to BS: Extending moratorium will make it harder for everyone

Tinkering with the NPA norms will merely push the problem to a later date

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Non performing assets | Moratorium

Business Standard 

lending, loan, bank, real estate, realty,

The Reserve Bank of India (RBI) and the banks in general are in a dilemma whether to end or extend the on August 31. Ending it when the economy is yet to start recovering will mean large scale loan defaults. Extending the beyond August 31, on the other hand, will allow little time to the banks to pursue recovery. Since interests and charges continue to accrue, the borrowers will be staring at mammoth repayments when the is finally lifted. Presuming that even half of the MSME, personal, auto and credit card account holders default, there will be a huge surge in non-performing assets (NPAs). Tinkering with the NPA norms will merely push the problem to a later date. So it may be a better idea to end the moratorium on the stipulated date and allow the banks to recover as much of the loans as possible, making provisions for the rest, well before March 31, 2021. This will also help the borrowers to prepare themselves psychologically to arrange for funds to repay their loans. Postponing the problem will make it harder for everyone – borrowers, banks and the RBI.

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First Published: Mon, July 27 2020. 23:43 IST
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