oppn parties RBI Should Provide Relief In Loan Repayment To Businesses Due To Covid-19 Disruption

News Snippets

  • University vice-chancellors in West Bengal decide not to hold final-year examinations despite UGC prod, will instead go by the state government advised 80-20 formula where 80% will be marked on performance in past semesters and 20% on internal assessments in the final semester
  • The Centre wants the ITI and other top Indian firms to bid for 5G as Chinese firms Huawei and ZTE are not likely to be allowed to participate
  • India and China agree on total disengagement to return to peace ahead of the next round of military talks
  • The Supreme Court allows delivery of summons and notices via WhatsApp and email, but questions remain on proof of actual receipt
  • National Investigation Agency says the proceeds from the Kerala gold smuggling case could have been used for terrorist activities
  • Four Maoists shot dead in Valmiki Tiger Reserve in Bihar
  • Despite localized lockdown, Covid cases continue to rise at an alarming rate in West Bengal. Newer areas brought under containment zones in Kolkata
  • ICSE, ISC results declared, Average scores in the English paper, 20% lower this year than the average in most years, pulls down the aggregate for most candidates
  • IIP contracts by 35% in May. Manufacturing goes down by 39.3%
  • Row erupts over CBSE's decision to reduce the syllabus by 30% this academic year due to the disruption caused by the pandemic. Experts say several lessons that the ruling dispensation does not like are being removed
  • Gangster Vikas Dubey's nephew killed in an encounter by UP police who also pick up his key aide Raju Khullar and his son Adarsh
  • MHA sets up an inter-ministerial committee to probe the alleged financial misdeeds of three trusts linked to the Gandhi family
  • Actor Jagdeep, most famous for his Soorma Bhopali act in Sholay, passes away
  • Pakistan says Kulbhushan Jadhav has declined to file a review petition and will stick to his mercy plea. India calls it a farce
  • India to keep a strict vigil to confirm that the Chinese are abiding by the deal on the pullback at the LAC
The plot thickens in Rajasthan. Sachin Pilot removed as deputy chief minister and PCC chief. His loyalists dropped as ministers.
oppn parties
RBI Should Provide Relief In Loan Repayment To Businesses Due To Covid-19 Disruption

By Sunil Garodia
First publised on 2020-03-17 11:12:45

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Writes for a number of publications.

The governor of the Reserve Bank of India (RBI), Shaktikanta Das, gratefully admitted that there will be extreme disruption due to the spread of Covid-19 and consequently growth will be hit hard in the press conference the apex bank urgently called on Monday. Beyond that, and answering questions about the Yes Bank reconstruction plan, the presser achieved little.

If the government and the RBI are worried that growth will suffer due to Covid-19, does it not recognize that the negative effect on growth will be a sum total of the problems faced by all business entities? Then why did the RBI governor not specify what relief the apex bank is going to provide to businesses that have taken loans from banks? Given the precarious state of the economy even before coronavirus struck and the subsequent disruption caused by the pandemic, the cash flow of all business, whether big, medium or small, is going to take a severe hit. How then will they pay their monthly loan installments? They run the risk of being put in the non-performing assets (NPAs) list if they default on payments for three or more consecutive months from the end of a particular quarter. Shouldn’t the RBI think of providing some relief (like increasing the default period to six months or allowing part payment) to businesses?

Disruption in business activity due to the Covid-19 pandemic cannot be compared to a usual economic slowdown. Businesses create reserves to tackle periods of slowdowns or negative growth as they are considered part and parcel of doing business. But any extraneous factor like a pandemic that can cause near-total disruption of business activity and cause immense losses is not factored in any business plan. Even at the most conservative estimate, the disruption caused by Covid-19 is going to last for at least the next two quarters, if not more.

For, what we are witnessing is just the beginning. If community transmission happens in India, it will be a disaster of a scale the country has never seen before. Fortunately, the government took steps very early to restrict entry of travelers from abroad and was prompt in ordering their screening and isolation. But unfortunately, it slipped in carrying out tests within the country and did absolutely nothing for asymptomatic cases. Thus, we do not yet know what kind of bomb we are sitting on and when and with what intensity will it burst. Hence, the RBI should work out a relief package for loan repayment by businesses without any delay. Otherwise, the already negative sentiment in the economy will go down further and businesses will become defaulters for little fault of their own.