Bank of Baroda's 90% borrowers opt for moratorium on term loan repayment

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Mumbai: State-run Bank of Baroda (BOB) on Monday said nearly 90 per cent of its eligible borrowers have applied for the moratorium offered on repayment of term loans. The Reserve Bank of India (RBI), in March, had allowed a three-month moratorium on payment of all term loans due between March 1, 2020 and May 31, 2020.

The RBI allowed granting the moratorium to all the accounts that are standard as on February 29, 2020. "Close to 90 per cent of our (eligible) clients have elected to use the moratorium," the bank's Managing Director and CEO Sanjiv Chadha said while speaking at a webinar organised by Care Ratings.

He said the bank had adopted an opt-out mechanism for the moratorium, which means all eligible borrowers get a moratorium unless someone specifically opts out of it.

When asked for his views on the extension of loan moratorium beyond May 31, 2020, Chadha said a workable proposition would be to link such an offering to repayment capabilities of the borrowers.

"When it comes to extending the moratorium and when we do our working capital assessment, what we try to sort is to make sure that whatever the repayment for term loan is, it is tied to the cash flow of the company," he said.

"So, therefore, when it comes to individual borrowers, even small MSMEs, we would, and again, should the regulation allow, want to extend the moratorium which is aligned to the repayment capacity of the borrower," he said.

Chadha sees some stress in the retail loan segment due to the disruptions caused on account of COVID-19.

"There is no doubt that this (retail) portfolio is going to be vulnerable because the kind of instruments you have to craft a customised solution for a retail borrower is not available as they are for industrial borrowers, large corporates and MSMEs. Therefore, we are going to have challenges there," he said.

Even before the COVID-19 outbreak, some signals of stress were seen in the retail segment, he added.