SBI economists call for overhaul of sector-specific loans after moratorium ends

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Economists at the State Bank of India (SBI) argued on Monday for a plan to restructure sector-specific loans after the six-month moratorium on loan repayments ended on August 31.

They said the moratorium data is not “significantly disturbing” but tackles “the unexpected and unintelligent wave of lockdown mania” in many pockets.

The list of voices is growing to demand a restructuring of loans given the impact of the coronavirus pandemic on economic activities. However, some point to the experience of the global financial crisis, where restructuring ultimately led to the accumulation of a huge pile of bad debts that the system has yet to overcome.

“It is imperative that the restructuring of loan accounts in certain sectors be used as a policy option after August 31 to alleviate stress,” SBI economists said in a report adding that the setbacks emanate from continued lockdowns of limited areas and also employment. losses.

“We believe that some sectors / companies may need support like one-off restructuring, sector support etc. to overcome the situation,” they added.

Last week, Union Finance Minister Nirmala Sitharaman said the government was actively engaged in discussions with the Reserve Bank of India (RBI) over loan restructuring.

“The emphasis is on restructuring. The Ministry of Finance is actively engaged with the RBI on this matter. In principle, the idea that restructuring may be necessary is well accepted,” she said.

SBI economists said the actual number of retail borrowers on moratorium is lower than reported because after the data was released, many borrowers began to repay.

In the corporate segment, companies with sufficiently strong balance sheets have also taken a break and are using the moratorium to save money in these uncertain times, they said.

Citing an independent sector analysis of more than 300 companies with debt of more than Rs 4 trillion, he said 40% of the moratoriums relate to sectors with a comfortable debt ratio like pharmaceuticals, consumer goods to rapidly changing health care, they added.

Economists also said that banks must be properly capitalized and added that it is imperative that the banking sector avoids a repeat of the post-2008 crisis experience by exercising caution and adopting the utmost due diligence. .

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