In an effort to further ease financial stress caused by Covid-19 disruptions, Reserve Bank of India (RBI) on Friday announced several monetary measures to provide “relief” on debt servicing and improving access to working capital.
“The intensification of Covid-19 disruptions has imparted priority to relaxing repayment pressures and improving access to working capital by mitigating the burden of debt servicing, prevent the transmission of financial stress to the real economy, and ensure the continuity of viable businesses and household,” RBI Governor Shaktikanta Das said.
Moratorium on Term Loan Installments
On March 27, the RBI permitted all commercial banks, co-operative banks, all-India financial institutions, and NBFCs to allow a moratorium of 3 months on payment of instalments of all term loans outstanding as on March 1. “In view of the extension of the lockdown and continuing disruptions due to Covid-19, RBI decided to permit lending institutions to extend the moratorium on term loan instalments by another 3 months, ie, from June 1 to August 31. Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, maybe shifted across the board by another 3 months,” Das informed.
Deferment of Interest on Working Capital Facilities
With respect of working capital facilities sanctioned in the form of cash credit/overdraft, the central bank has permitted lending institutions to allow a deferment of another 3 months, from June 1 to August 31, in addition to the 3 months allowed on March 27 on payment of interest for all such facilities outstanding as on March 1, he added.
Payment of Interest on Working Capital Facilities for the Deferment Period
To “ameliorate” the difficulties faced by borrowers in repaying the accumulated interest for the deferment period on working capital facilities in one shot, RBI has permitted lending institutions to convert the accumulated interest on working capital facilities over the deferment period (up to August 31) into a funded interest term loan which shall be repayable not later than the end of the current financial year ie, March 31, 2021, the Governor also said.