Loan books under moratorium falling from May-end levels: Macquarie

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Published: June 19, 2020 12:10 AM

One of the banks with a large market share in fast-tags observed that activity levels have now reached almost 75% of pre-Covid levels.

At the same time, managements of lending institutions have been cautious in arriving at a final level as borrowers are entitled to opt for the moratorium up to August 31.At the same time, managements of lending institutions have been cautious in arriving at a final level as borrowers are entitled to opt for the moratorium up to August 31.

Banks are seeing a decline in the share of their loan books under moratorium from the 25-30% levels seen around May end, Macquarie Capital Securities (India) has said in a note to its clients.

At the same time, managements of lending institutions have been cautious in arriving at a final level as borrowers are entitled to opt for the moratorium up to August 31.

A major reason cited for the decrease was that job losses in the white-collar segment have not been as widespread as feared earlier. A number of other factors contributed to this drop, such as better communication of the implications of availing the moratorium and a tweak in opt-in/opt-out strategies by lenders. When the moratorium was first announced in March, there was panic among customers, and many seemed to opt blindly without reading the fineprint, Macquarie said.

“Even banks were not able to communicate properly about the interest being charged during moratorium. Almost 50% of customers, as per banks based on their survey of customers done, opted for moratorium just to conserve cash,” the note said. This was corrected in the second round of moratorium when banks were able to clearly communicate to customers about the additional liability they would incur.

Moreover, some banks have now moved out from a blanket opt-out strategy to an opt-in strategy. While banks were giving an entire three-month moratorium for loans, they are now giving only a one-month moratorium, after which customers can choose to extend it further. “For HDFC, the retail loan book under moratorium has come down to 7% as of June 15 from 21% in May, and a small portion of this 7% is new customers opting for moratorium in the second round. On the corporate side, the ~40% number has been largely flat,” Macquarie said.

Another reason cited for the decrease in moratorium was that job losses in the white-collar segment have not been as widespread as feared earlier. While many employees faced salary cuts and bonus cancellations, those among them worried about losing jobs in the first round of moratorium felt more comfortable subsequently. “Two major banks which have a large number of salary accounts indicated that the salary uploads into the accounts dipped slightly in April but were stable in May, and they have not seen any major decline, clearly indicating that salaries at an aggregate level have remained stable. Hence, we believe worries about large-scale retail defaults are exaggerated,” the broking firm said.

One of the banks with a large market share in fast-tags observed that activity levels have now reached almost 75% of pre-Covid levels. While metros are facing challenges with respect to housing sales, activity in non-metros is picking up and registrations of properties are happening as government offices are functioning there reasonably.

Also, for big developers, the government has allowed registration of properties to happen at builders’ offices, subject to some conditions. “The HDFC management clearly said the traction in June 2020 with respect to applications received surprised positively. The applications received as of June 15, 2020, was 50% of the level seen for the entire month of June 2019,” Macquarie said.

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