Over 80% of public sector banks’ individual borrowers opted for moratorium: RBI Report

Over 80 per cent on public sector banks’ individual borrowers opted for the first round of moratorium announced in March 2020, the Reserve Bank of India (RBI) said in its Financial Stability Report released on Friday. In contrast, the figure was far lower at 41.8 per cent for private sector banks and just 8.4 per cent for foreign banks.

“What this means is that, generally, the quality or financial health of private and foreign bank borrowers is better than that of PSB borrowers. Private and foreign banks seem to cherry-pick their customers while sanctioning loans, ” said Madan Sabnavis, Chief Economist, CARE Ratings.

Too many moratorium seekers from PSBs

By outstanding loan amount, too, the proportion of PSB customers taking the moratorium as on April 30, 2020 was high, at 80 per cent.

By value, individual loans under moratorium for private and foreign banks stood at 33.6 per cent and 21.1 per cent, respectively. Like public sector banks, even small finance banks saw over 90 per cent of their individual customers (73.2 per cent by value) opting for moratorium. Overall, more than half of the banking system’s outstanding loans were under moratorium. Again, the proportion was much higher at 67.9 per cent for public sector banks, compared to 31.1 per cent for private sector banks and 11.5 per cent for foreign banks.

Moreover, 48.6 per cent of the borrowers availed of moratorium overall, but the proportion of individual borrowers who opted for the facility was higher at 50.4 per cent. In terms of loan outstanding, 55.3 per cent of individual borrowers had signed up for moratorium, compared to 50.1 per cent across the board. The gap was wider for PSBs – 80 per cent of individual loans outstanding were under moratorium compared to 67.9 per cent across borrower categories. “A higher proportion of individual borrowers availing moratorium is worrisome, as it indicates that they are finding it difficult to service EMIS due to job losses or pay cuts. Similar is the case with MSMEs. Their affliction might carry on through the year, unlike corporates who might have used the facility to manage liquidity issues and could see a turnaround later in the year,” said Sabnavis.