In view of the COVID-19 pandemic, the Monetary Policy Committee (MPC) decided to advance its meeting scheduled for 31st March, 1st and 3rd April 2020. It met on 24th, 26th and 27th March 2020 and undertook a careful evaluation of the current and evolving macroeconomic and financial conditions, and the outlook. The RBI Governor stated as “I wish to take this opportunity to express my deep gratitude to the MPC members for their swift response to the unprecedented situation and for their valuable contribution to the monetary policy decision taken on 27th March 2020. I also wish to thank our teams in the RBI for their continued high-quality support to the MPC’s work through their hard work, research and logistics”.
Alongside liquidity measures, it is important that steps are taken to mitigate the burden of debt servicing brought about by disruptions on account of COVID-19 pandemic. These measures include moratorium on term loans; deferring interest payments on working capital; easing of working capital financing; deferment of implementation of the net stable funding ratio; and the last tranche of the capital conservation buffer.
All commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) (“lending institutions”) are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020.
In respect of working capital facilities sanctioned in the form of cash credit/overdraft, lending institutions are being permitted to allow a deferment of three months on payment of interest in respect of all such facilities outstanding as on March 1, 2020. The accumulated interest for the period will be paid after the expiry of the deferment period.
The moratorium on term loans and the deferring of interest payments on working capital will not result in asset classification downgrade.
Note: The above provisions are not mandated by RBI, till 28 March 2020, rather these are just recommendations that the banks are allowed to provide benefit of moratorium to term loan holders. The interpretation and implementation of the above mentioned recommendations may be varied from bank to bank.
(Also read: List of Essential Services remain open during lockdown and penalties for violation)
(Also read: Finance Minister announces several relief measures relating to Statutory and Regulatory compliance)
(Also read: Indian Railways relaxes Counter generated ticket Refund rules upto 3 months from date of journey)
Disclaimer: The above post includes some content used from RBI website and executed on this website for fair use only. As this website is of educational nature, hence the content is used for education and awareness to the public.