Small businesses in India, already struggling amid the pandemic, are now having to repay mounting debt after a loan holiday ended last month. The Reserve Bank of India gave borrowers a six-month freeze on their loan repayments, which ended on Aug. 31, with about a third of India’s $1.8 trillion outstanding loans being deferred under the program. Businesses still trying to cope with a collapse in demand must now figure out how to pay back their loans or face closure.
That’s a dilemma Regi Philip is dealing with. He owns a travel agency in Mumbai, which has had no business since April when the nation went into lockdown. He got a temporary reprieve from his bank, helping him save 4.5 million rupees ($61,000) a month in debt repayments. He’s worried about how he’s going to resume those payments, given his travel business hasn’t recovered yet and he still has salaries and other overheads to pay.
“The Reserve Bank should ask banks to extend the moratorium,” said Philip, managing director of Cosmos Agencies LLP. “Else, I may have to resort to cut capital expenditure and staff retrenchment.”
The central bank has provided some relief to borrowers by allowing banks to extend the moratorium and restructure loans, but the process isn’t automatic. Lenders can grant extensions of as long as two years, and have until the end of the year to pick which loans to recast and until June 2021 to get it done…Read more>>