Mumbai: Amid an increase in localized lockdowns across the country, central bank governor Shaktikanta Das said on Wednesday that a moratorium on loan repayments is not currently required and stated that companies are better prepared for the situation.
It can be noted that the RBI had announced a six-month moratorium in the early days of the national lockdown last year to help borrowers hit by a slowdown in economic activity. The entire state of Maharashtra is on lockdown to non-essential services, and localized and nightly lockouts are being observed in many parts of the country, including the state capital, to limit the surge in cases.
In today’s conditions there is no need for one moratoriumDas said during a conversation with journalists following the announcement of the first monetary policy review of the new fiscal year.
He said companies, especially the private sector, are better prepared today to deal with the situation and continue their activities.
That added, however, that he cannot provide any information on the future action of the RBI.
The end of credit moratoriums as a conventional instrument resembling a standard set of instruments reminded Das that last year the RBI had taken a number of innovative measures to help the economy in the pandemic and pointed out that the structured bond purchases in the framework the GSAP program announced earlier in the day is one such measure.
We regularly monitor system quality data. In no situation should a central bank react reflexively. And we won’t take it either. We will observe a situation, its depth, severity and impact before we make a decision, he said.
It should be noted that the credit moratorium lasted until August 2020, followed by a one-time restructuring for selected accounts. The top court rejected an extension of the moratorium and asked banks to classify defaults by borrowers after August according to the standard norms.
The moratoriums helped limit the stress on banking books, but lenders will report an increase in reported non-performing assets (NPAs) in March 2020, following the clarification of the Supreme Court.
It is estimated that Maharashtra’s month-long lockdown will result in a Rs 40,000 billion hit across all sectors.
Meanwhile, Das reiterated his comments from last week, expressing hope that the current surge in infections will have no impact on economic growth, stating that factories are functional, vaccination is active and people are currently better off Be prepared to deal with COVID-19.
It should be noted that earlier in the day, the RBI maintained its estimate of real GDP growth of 10.5 percent for FY22 after shrinking over 7 percent in FY21.
The admitted that some businesses such as restaurants have been affected by the new lockdowns, but stressed that Indian businesses have an innate ability to adapt and hotels have already started using alternatives such as home delivery to offset the setbacks.