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Last Updated : May 22, 2020 12:22 PM IST | Source: Moneycontrol.com

Accumulated interest for moratorium period can be converted into term loan

The thus converted term loan does not have to be repaid immediately after moratorium ends

Reserve Bank of India Governor Shaktikanta Das announced the extension of loan moratorium till August 31 and added that the accumulated interest for this moratorium period can be converted into a term loan.

The thus-converted term loan does not have to be repaid immediately after moratorium ends, he clarified.

“Individual banks have the right to take a decision on whether this will be allowed for all borrowers. It is only an enabling provision and not a mandate,” he added.

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The moratorium has now been made into a six-month one. Das also added that lending institutions are being permitted to restore the margins for working capital to the origin level by March 31, 2021.

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The governor said that the May 22 announcements could be divided into four categories – aimed at improving functioning of markets, to support exports and imports ,to ease financial stress by giving relief on debt servicing and better access to working capital, and to ease financial constraints faced by state governments.

Key measures announced on May 22 are as follows:

> Repo rate cut by 40 bps to 4 percent, Reverse Repo gets adjusted to 3.35 percent

> GDP growth outlook for FY21 seen in negative territory, some pick up seen in H2FY21

> Moratorium extension for another three months

> Accumulated interest for moratorium period can be converted into a term loan, doesn't have to be repaid immediately after moratorium ends

> Group exposure limit increased to 30 percent from 25 percent

Check our complete coverage on RBI's May 22 announcements here

“The RBI is ready to use all its instruments to address the dynamics of an unknown future. Today's trials will be traumatic but together we will triumph,” he added.

This is the governor's third such press conference since the coronavirus pandemic and subsequent lockdown in March.

In the first two pressers on March 27 and April 17, the RBI governor announced a series of measures to ease liquidity pressure in the banking system and cushion the economy from the Covid-19 shock.

This is also the central bank head's first media address after Finance Minister Nirmala Sitharaman concluded the fifth and last tranche of the Rs 20 lakh crore financial stimulus package announced by Prime Minister Narendra Modi.

Check our complete coverage on RBI's May 22 announcements here
First Published on May 22, 2020 11:13 am
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