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JSW Steel, Tata power are among 320 companies seeks moratorium on loan payments from banks and investors

As part of several relaxations and measures adopted by the Finance Ministry as well as the Reserve Bank of India (RBI), many sectors and borrowers have been granted a three-month moratorium on the repayment of borrowings. This has served as a boon to the manufacturing sectors as all production activities and other economic ventures are at a standstill. Hundreds of companies and enterprises have stepped up to avail of the options provided for relief by the Reserve Bank of India.

“Big Corporates seek moratorium”

Among these 328 industrial enterprises are big names including Tata Power, Piramal
Enterprises, and JSW Steel looking for a loan moratorium. These companies were listed by the rating agency ICRA in a statement. A few other companies which have sought the moratorium include TAJGVK Hotels & Resorts Limited, Tata Power Renewable Energy, GMR Hospitality and Retail, GMR Hyderabad Aviation SEZ and GVK Jaipur Expressway.

“ICRA List”

The ICRA also said that the list goes on to include those enterprises that have sought a
moratorium on payments as COVID-19 Regulatory Package provided by the RBI as of March 27, 2020. This was on the basis of the approval of the lender that was received either after the original date or is still pending to be received.

The list has been published by ICRA in line with the new guidelines laid down by the Securities and Exchange Board of India (SEBI) on relaxation in compliance for default recognition amid the loan moratorium granted by the Reserve Bank of India.

“NBFCs Dilemma”

Though Non-Banking Financial Corporations, also known as NBFCs had earlier been excluded from the benefit of the moratorium according to an internal announcement provided by the RBI and its regulatory authority State Bank of India, these companies have now applied for the loan moratorium include CreditAccess Grameen Limited, Indostar Capital Finance Limited, and Piramal Capital & Housing Finance. The State Bank of India had earlier stated that the bank would not be favoring the NBFCs requests for the moratorium and would rather have them borrow under the targeted loan term repo operations (TLTRO) window.

“Fear of drying liquidity”

Most of the companies that seek moratorium have a credit rating of relatively safe AA rating and lower, according to data compiled by rating agency ICRA. The rating agency speculates that these companies may be fearing a drain of liquidity due to lack or slow revenue and have applied for the loan extension for the next few months as the pandemic continues at an unpredictable rate. However, borrowers will have to pay the entire interest accrued during the moratorium period once the moratorium period is over.

“These companies believe that preserving liquidity is better till the time there is clarity on fresh funding and sanctioning. You are not assured of the timing of the sanction,” said Anil Gupta, vice-president, sector head, financial ratings, ICRA.

“Review if not approved states ICRA”

The rating agency noted that missed payment by these entities even in the case of pending formal approval from the lender prior to the original due date is not considered as a default.
“It may be noted that for the entities that are yet to receive approval for the moratorium from their lending institutions, if the same is not received in due course, ICRA would review its stance on default recognition,” it said.

The central bank had last month allowed a three-month moratorium on payment of installment in respect of all term loans outstanding on March 1, 2020.”All commercial banks, co-operative banks, all-India financial institutions, and NBFCs are being permitted to allow a moratorium of three months on payment of installments in respect of all term loans outstanding as on March 1, 2020,” RBI governor Shaktikanta Das had said.

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