Three-month moratorium on term loans may limit NPAs but hurt financials

While banks may not face pressure on asset quality, their income statements may be hit.

Terming the 3-month moratorium on term loans by the Reserve Bank of India (RBI) as the most-needed ammunition to withstand the lockdown, bankers and industry observers said this would bring the required relief to banks’ asset quality.
 

As most lenders feared that their customers’ repayment ability might be impaired due to the lockdown, Friday’s move has allayed the fear.
 

Nilufer Mullanfiroze, senior vice-president (retail lending and cards) of Federal Bank, said: “For the right set of customers and firms, if the interest burden reduces for three months, it will have a positive impact on banks and customers.”
 

However, the flip