"Even the borderline companies that could have serviced their loans went for the moratorium owing to the uncertainty of future cash-flows, but this shows that such loans can be considered vulnerable to differing degrees", Madan Sabnavis, chief economist, Care Ratings, said. Finance Minister Nirmala Sitharaman gave this indication while speaking at the function of Industry Chamber FICCI on Friday.
The Finance Minister said that the government is in touch with the Reserve Bank of India (RBI) regarding moratorium and restructuring on repayment of loans.
The Finance Minister said that the government is focused on loan restructuring and the Finance Ministry is actively engaged with the central bank. Its aim is that if restructuring is needed, it should be done in a better way. Encouraging the Atma Nirbhar Bharat mission and highlighting the government's step to open up all sectors for private firms, Nirmala Sitharaman had said that the final call as to which are the strategic sectors is not made yet. "We have taken these steps to ensure that the impact is felt on the ground".
Addressing the concerns raised by FICCI members on the difficulties faced by micro, small and medium-scale enterprises (MSMEs) in taking loans under the Emergency Credit Guarantee Scheme announced by the government, Ms Sitharaman said banks can not refuse credit to MSMEs covered under emergency credit facility. The Finance Ministry will look into that matter.
"Meanwhile, she informed that the government is working on the Development Finance Institution (DFI), and ".we will know shortly what shape it will take".
"I fully understand the requirements of the hospitality sector on extension of the moratorium or restructuring".
ANIThe Finance minister also said that the decision on reducing GST rates on the healthcare and other products will be taken by the GST Council.
Earlier this week, HDFC Bank chairman Deepak Parekh in an exchange with the RBI governor said the moratorium was being partly misused and should not be continued as it would hurt banks, and particularly smaller non-bank finance companies or shadow banks.
The report also said bad loans could soar to nearly 15% of total loans by March 2021 in a worst case scenario, compared with 8.5% in March this year.
The hospitality sector has for always been urging the government to pause loan repayments (even) after the six-month moratorium ends on August 31. Only time can tell how will this move benefit the hospitality industry.