The loan moratorium is likely to be extended by another 3 months by the Reserve Bank of India (RBI), Zee Business Executive Editor Swati Khandelwal reported today. While the companies are likely to gain from this move, the development could be negative for banks, Khandelwal said. The companies may get a relief from loan repayment till 31 August, 2020, she added.

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The extension of moratorium may not be without conditions as the banking regulator is likely to lay down some “strict” conditions, she revealed.

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Sources have told Zee Business that the banks may have to double the provisioning from the current 10 per cent to 20 per cent, Khandelwal said. This is a big negative for the bank as the provisioning would translate into a whopping Rs 70000 cr reduction in the profits of the banks.

The banks will be taking up the matter with the Finance Minster Nirmala Sitharaman tomorrow, Khandelwal said. Since the deadline for the moratorium ends on 31 May, the announcement from the RBI could likely come soon, she added.

The notification may come by this week or probably next week.

Commenting on the news, Zee Business Managing Editor Anil Singhvi said that the moratorium will further defer the repayment to banks by another three months. Singhvi said that most banks in their March quarterly results reported losses despite a sound asset quality status. He reasoned that because of the moratorium, the loan repayments that were not made were not classified as NPAs (Non Performing Assets).

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Singhvi said that the provisioning for most banks is rising. This will reduce the profits of the banks by Rs 70000 cr, which is significant.