Don’t Extend Moratorium, Deepak Parekh Urges RBI Governor
Deepak Parekh, head of HDFC Ltd., asked the banking regulator not to extend the moratorium on loan repayments beyond Aug. 31.
Deepak Parekh, veteran banker and head of India’s largest mortgage lender, asked the banking regulator not to extend the moratorium on debt repayments beyond Aug. 31 even as India Inc. sought a one-time restructuring of outstanding loans.
“Do not extend the moratorium as we have seen that people who have the ability to repay, whether it is corporates or individuals, are taking advantage under this moratorium and are deferring payments,” Parekh, chairman at Housing Development Finance Corp., speaking during an interaction with members of the Confederation of Indian Industry after the RBI governor's speech. “This is going to hurt us and smaller NBFCs.”
The central bank first announced a moratorium on loans for three months till May and then extended it till August end to help borrowers as the Covid-19 lockdown stalled economic activity, causing job losses and salary cuts. Indian banks, already grappling with bad loans, expect non-performing assets to rise after the moratorium ends.
Demand For One-Time Restructuring
Parekh also said there’s a need for a system-level debt restructuring where lenders can rework outstanding loans without attracting any additional provisions. Such a restructuring scheme was allowed in 2008 when the global economy faced its last major crisis, he said.
Uday Kotak, managing director and chief executive officer of Kotak Mahindra Bank Ltd. and president of CII, also reiterated the demand. "We are moving to a constantly changing world. In these new normal or never normal times, the question is what is the role of different actors in the economy and the question of fiscal and monetary policy," he said. "Traditional rules and norms which may have worked in normal times, need to undergo a different perspective. We should be thinking of a ownership neutral framework."
There is a growing view across the membership that there is a need for a one-time restructuring.Uday Kotak MD & CEO, Kotak Mahindra Bank
Kotak said the RBI has taken “very significant pro-active steps for liquidity, and there is a continuing need for liquidity for Indian industry as we go forward”.
The RBI governor said he will review the industry’s suggestion for future policy decisions.