Deepak Parekh, chairman of India’s largest mortgage lender HDFC, on Monday urged the RBI not to extend the loan moratorium it had earlier announced until August 31, warning that such a move would hurt HDFC as well as smaller NBFCs.
“Please do not extend the moratorium...because we see that even people who have the ability to pay, whether it is individuals or corporates, are taking advantage under moratorium and deferring payments,” Parekh said while addressing a meeting of the National Council of the Confederation of Indian Industry (CII).
Speaking of rumours that the moratorium, announced in March and that had already been extended by three months in May until August 31, would get another extension, Parekh said “that is going to hurt us. It will hurt the small non-banking finance companies particularly”.
Parekh also called for loan restructuring to be permitted, barring with all financial institutions are likely to face a large buden of non-performing assets—making this warning just days after the RBI warned that bad loans could reach a 20-year high due to the COVID-19 pandemic.
RBI Governor Shaktikanta Das, who was present after having delivered the keynote address, noted Parekh’s suggestion but said he would not be able to comment on them at the time.
In his address, Das sought to highlight some of the positives facing the Indian economy, including a committee report stating that private investment in agriculture would more than double between FY16 and Fy23, amid record production of food grains. Das’s address also spoke of changing energy patterns and the promise of renewable energy, as well as looming growth in the Information and Communication Technology sector. He also called for an improvement of India’s position in the Global Value Chain participation index.
Speaking of the NITI Aayog estimate that India would need $4.5 trillion in infrastructure investments by 2030, Das said, “On financing options for infrastructure, we are just recovering from the consequences of excessive exposure of banks to infrastructure projects. Non-performing assets (NPAs) relating to infrastructure lending by banks has remained at elevated levels. There is clearly a need for diversifying financing options.”
“The setting up of the National Investment and Infrastructure Fund (NIIF) in 2015 is a major strategic policy response in this direction. Promotion of the corporate bond market, securitisation to enhance market-based solutions to the problem of stressed assets, and appropriate pricing and collection of user charges should continue to receive priority in policy attention,” he said.
