End of loan holiday threatens pain, defaults for Indian business

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 Indias $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.

“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 isnt 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.