Page 11 - Banking Finance May 2020

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All Customers not opting For wholesale and SME loans, the bank underway in the past few years," the
had offered the facility on an opt-in report said. Asset quality at these lend-
for loan moratorium basis. It spoke to wholesale and retail ers has weakened in recent years amid

The Reserve Bank of India has allowed customers and, only when convinced, worsening economic conditions, and
companies to opt for a three-month offered the moratorium. the shock from the coronavirus out-
moratorium on loan repayments to break will exacerbate this trend, it
combat lockdown, data with individual "The bank has given moratorium to all added.
banks suggests that not many firms its retail loans while it followed an 'opt-
have chosen to defer routine interest in' model on the corporate side, where Given how significant exposure banks
payments for now. the need for moratorium was quite have to the non-bank financiers,
negligible," Kotak Institutional Equities Moody's expects that the weakening
The Private Banks have revealed that noted. solvency will, in turn, pose risks to the
not many companies or salaried retail stability of the broader financial sys-
customers have opted for the three- Bankers, however, said the option to tem.
month moratorium permitted by the avail of the moratorium was still avail-
RBI on March 27. able to borrowers and they could re- "We expect a significant weakening in
quest for the same, depending on their asset quality at NFBCs, that will
As per rating agency ICRA, about 328 cash flows. worsen the liquidity stress triggered by
companies - including The Tata Power the three-month moratorium on cus-
Company, JSW Steel and Kalyan Jewel- NBFCs more vulnerable to tomer loan repayments," said Srikanth
lers, Air India Express and ONGC Petro Vadlamani, vice-president and senior
Additions - have opted for the mora- covid-19 - Moody's credit officer, Moody's.

torium benefits. Covid-19 pandemic will lead to further
deterioration in asset quality of non- Indian banks have lent Rs. 8.07 trillion
Axis Bank said only about 25-28 per bank financiers, a segment that is to non-bank financiers as on 27 March,
cent of the customers, in value terms, more exposed to the downturn than up 26% from the same period last year,
and 10-11 per cent, in absolute num- banks, said a report by Moody's Inves- showed data from the Reserve Bank of
bers, sought the moratorium. tors Service. India (RBI).

A large number of small and medium "Asset quality at non-banking financial According to the rating agency, NBFCs
enterprises, many of which have lim- companies (NBFCs) will significantly are more exposed than banks to the
ited working capital, seem to be avail- deteriorate as economic disruptions coronavirus-led downturn, given their
ing themselves of the moratorium ben- from the coronavirus outbreak deepen focus on riskier segments, and in par-
efit. an economic slowdown that has been ticular corporates and the real estate

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