Takers for loan moratorium decline to less than 30% | Economic Times

Mumbai: Borrowers availing of the repayment holiday dropped to less than 30 per cent at banks and non-bank lenders after financiers advised them not to use the moratorium for a period longer than absolutely necessary. This is aimed at ensuring that the financial position of the borrowers and internal ratings used for deciding future loans don’t worsen.Lenders told ET that they were more stringent in extending the second phase of the moratorium, from June to August, and were reviewing the cash flows of borrowers before doing so.“We are taking a detailed assessment of the customers opting for Moratorium II. We are now going for the opt-in strategy, and assessing cash reserves of the borrowers before extending the relief,” said a senior official with a private bank. “We are also being careful with those customers seeking top-up loans and have also availed of the moratorium.”The RBI announced a three-month moratorium in March to help borrowers hit by the economic downturn caused by Covid-19 and the ensuing lockdown. Customers Being EducatedThat was subsequently extended by another three months to August. In the first phase, the system-level moratorium covered about half the total loans. An opt-in strategy requires borrowers to ask for a halt rather than being allowing to do so by default.“We are encouraging customers not to take the moratorium because this is not free money,” said IIFL chairman Nirmal Jain. “The moratorium amount also bears interest. It gets accumulated and customers who understand this are not taking the moratorium. I expect the moratorium levels to come down significantly.” Indiabulls Housing Finance saw moratorium levels drop to 20 per cent at the end of June from 35 per cent earlier.“Customers are being educated on the economics of the moratorium and the proportion of customers opting for moratorium has declined from the peak of 35 per cent,” said Indiabulls Housing Finance deputy managing director Ashwini Hooda. “Collections have effectively doubled from April to May and again from May to June, and have now reached almost 60 per cent of the pre-Covid levels.”A Centrum report suggested that housing finance companies also saw lower moratorium levels of 20 per cent in June, with home loans typically topping the repayment-priority list for individual borrowers.Equitas Holdings saw moratorium levels fall from 93 per cent to nearly 50 per cent at the end of June. While repayment halts at its microfinance business fell to 56 per cent from 100 per cent, the proportion of small businesses opting for this relief fell to 42 per cent from 87 per cent.For Bajaj Finance, loans under moratorium fell from 27 per cent at the end of April to 15.5 per cent on June 30. As per rating agency ICRA, uncertainty over lenders’ asset quality remains high because of the existing loan moratorium. Even if 10-20 per cent of these borrowers were to default, the slippage rate for banks could rise 3-8 per cent. Some estimates suggest that gross bad loans could swell to 11.6 per cent by March 2021 from 8.6 per cent at the end of March 2020.“We are not too enthused about offering a full six-month moratorium: That has the ability to change a customer’s payment behaviour,” said Sanjay Sharma, MD, Aye Finance, a non-bank lender focused on MSME lending. “We are deeply evaluating whether the customer really needs this relief. We want borrowers to make payments wherever they can.”