New Delhi: Extension of the moratorium on loan repayments will not help anybody, and it will only postpone the problem and not solve it, says former Reserve Bank Deputy Governor R Gandhi, adding that both individuals and businesses have enough cash to repay the loans and there is no case for its extension despite the demand from several quarters.
The six-month moratorium on loan and EMI repayments, which was announced by the RBI in two stages in March and May this year, is set to expire at the end of this month. While some bankers and lenders have publicly opposed yet another extension, some in the industry have demanded its extension. The issue has sharply divided the people in the financial and banking industry.
“The loan moratorium should not be extended. It is not going to help anybody whether it is the borrower or the financial institutions, nobody is going to be helped by the extension,” said R Gandhi, former Reserve Bank Deputy Governor.
“Moratorium only postpones the problem further. That way we are not solving the problem,” Gandhi said in the Business and Banking Dialogue organised by Mumbai based payment technology firm EPS India.
R Gandhi, who was head of the economy division of the Reserve Bank, admits that a moratorium on loan repayment was definitely needed in the first three months of the lockdown as that was a period of uncertainty.
Data suggests people have enough cash to repay loans
While referring to the latest official data, the former RBI officer says actual behaviour of borrowers during the lockdown confirms that people have cash to repay loans.
R Gandhi said all types of outstanding loans have come down, whether it is individual loan or corporate loan, every type of business has started paying their dues.
“It means they have capacity to pay back loans including individual borrowers,” Gandhi noted.
He says normally credit outstanding goes up during the times of liquidity crisis as this is the easiest way to avail the credit but people have brought down their credit card dues during the lockdown period.
“Look at the credit extended against fixed deposits, look at the credit outstanding against bond, debentures and equities, these are the assets available to people against which they will raise credit in case of cash problems but actually they have paid off,” Gandhi said in response to a question by ETV Bharat. “It means they have surplus cash available with them.”
Outstanding business loan also declined during lockdown
While talking about the financial data of the lockdown period, the former RBI official says the phenomenon of repaying loans is not restricted to individual borrowers who borrow money to buy home, vehicle or personal loans for some other purpose.
“Look at the businesses, the outstanding amount has come down for every type of business loan,” he said.