RBI Announces Extension of Moratorium on Term Loans by 3 Months

The Reserve Bank of India announced the extension of the moratorium on term loans by another 3 months from June 1 to August 31, 2020. RBI Governor, Shaktikanta Das made this announcement due to the extension in the lockdown. The earlier notification allowed all lending institutions to offer a three-month moratorium for payment of all instalments payable between March 1, 2020, and May 31, 2020.

They clarified that the moratorium/deferment will not be treated as changes in terms and conditions of loan agreements. Due to the financial difficulty of the borrowers and, will not result in asset classification downgrade.

Other Announcements are:

(1) Small Industries Development Bank of India (SIDBI) – Another 90 days extension for the 90-day term loan facilities will be offered. In order to provide greater flexibility to SIDBI in its operations.

(2) Foreign Portfolio Investors (FPI) – Additional three months will be allowed to FPI to fulfil the condition that at least 75% of allotted limits be invested within three months. This is under the Voluntary Retention Route (VRR).

(3) Exports – The maximum permissible period of pre and post-shipment of credits is increased from 1 year to 15 months. This is done to give a boost to exports.

(4) EXIM Bank – To extend a line of credit of ₹15,000 crores to the EXIM Bank for a period of 90 days from the date of availing with rollover up to a maximum period of one year so as to enable it to avail a US dollar swap facility.

(5) Imports – Extension of Time for Payment for Imports from 6 months to 12 months from the date of shipment for such imports. Which is made on or before July 31, 2020.

(6) Working Capital – Lending institutions are being permitted to restore the margins for working capital to the origin level by March 31, 2021.

(7) Asset Classification – The rescheduling of payments on account of the moratorium/deferment will not qualify as a default. For the purposes of supervisory reporting and reporting to Credit Information Companies (CICs) by the lending institutions.

The moratorium on term loans & deferring of interest payments on working capital will not lead to asset classification downgrade.

(8) Resolution Timeline – Lending institutions are permitted to exclude the entire moratorium/deferment period. From March 1, 2020, to August 31, 2020, from the calculation of 30-day Review Period or 180-day Resolution Period. If the Review/Resolution Period had not expired as on March 1, 2020.

(9) Limit on Group Exposures under the Large Exposures Framework – To increase a bank’s exposure to a group of connected counterparties from 25% to 30% of the eligible capital base of the bank. The increased limit will be applicable up to June 30, 2021. This is done with a view to facilitating the flow of resources to corporates.

(10) Consolidated Sinking Fund (CSF) of State Governments – They decided to relax the rules governing withdrawal from the CSF. While at the same time ensuring that depletion of the Fund balance is done prudently. These relaxations to states will release an additional amount of about ₹13,300 crores.