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The loan moratorium is likely to be extended by another 3 months by the Reserve Bank of India (RBI). While the companies are likely to gain from this move, the development could be negative for banks. The companies may get a relief from loan repayment till 31 August, 2020.

The extension of moratorium may not be without conditions as the banking regulator is likely to lay down some “strict” conditions.

Sources have told that the banks may have to double the provisioning from the current 10 per cent to 20 per cent. This is a big negative for the bank as the provisioning would translate into a whopping Rs 70000 cr reduction in the profits of the banks.

The banks will be taking up the matter with the Finance Minster Nirmala Sitharaman tomorrow. Since the deadline for the moratorium ends on 31 May, the announcement from the RBI could likely come soon.

The notification may come by this week or probably next week.
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