Covid Impact: Banks may ask RBI for relief to tackle anticipated stress

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Published: March 19, 2020 6:30:28 AM

Data from RBI shows banks’ outstanding loans to services sector stood at Rs 24.32 lakh crore as on January 31, accounting for 27.3% of the total non-food credit.

Banks have been told to restructure all MSME accounts that were standard as on January 1, 2020 and the forebearance is available till December 31, 2020.Banks have been told to restructure all MSME accounts that were standard as on January 1, 2020 and the forebearance is available till December 31, 2020.

Banks are likely to approach Reserve Bank of India (RBI) for relief measures that can be considered given the adverse impact that the coronavirus pandemic will have on businesses. FE has learned that Indian Banks’ Association (IBA) is likely to seek regulatory breathers, including a moratorium on repayments by some affected companies.

Given that more than a fourth of their loans — or Rs 24 lakh crore — is riding on the services sector, which would be hit the hardest, they are understandably concerned. Moreover, their exposure to the MSME sector is Rs 4.8 lakh crore.

Banks have been told to restructure all MSME accounts that were standard as on January 1, 2020 and the forebearance is available till December 31, 2020.

A meeting of top lenders on Monday discussed the business continuity plans of banks. A senior banker told FE that business continuity of banks was discussed and how services through digital payment channels could be offered amid the lockdown. “We are in the process of collating views to understand the impact on various sectors of industry and then we will approach the government and the regulator,” he said. “We can anticipate some stress and have to prepare ourselves,” a senior executive at State Bank of India (SBI) said. He added, “So far we have not seen reduced cash flows and there is no stress visible in the accounts.” However, most bankers believe the worst-hit sectors would be airlines and hospitality.

Data from RBI shows banks’ outstanding loans to services sector stood at Rs 24.32 lakh crore as on January 31, accounting for 27.3% of the total non-food credit. Of this, transport operators owed banks Rs 1.41 lakh crore while hotels and restaurants owed them Rs 45,394 crore. The exposure to trade is Rs 5.2 lakh crore while the exposure to commercial real estate is Rs 2.27 lakh crore. The outstanding loans to industry — including MSME — are Rs 28.17 lakh crore.

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