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Banks face operational hurdles in implementing 90-day loan moratorium

The 90-day moratorium on all term loans given to customers is a big relief for banks as well as borrowers, but the initial feedback from the industry is that the documentation process may entail some hardships.

Bankers anticipate operational challenges with respect to communicating the Reserve Bank of India’s (RBI’s) dispensation to customers, documenting their consent to exercise the option and the requisite paperwork that comes along with it. In the context of the nationwide lockdown and banks operating on bare-bone infrastructure, bankers say some of the basic processes could be difficult to implement in the current scenario. For instance, most of the branches operate with skeletal human resource to carry out just basic work during the lockdown period.


“Footfalls in the branches have reduced significantly,” says Padmaja Chunduru, managing director and chief executive of Indian Bank. Unless customers approach the branches themselves, which in a lockdown like scenario could be difficult, banks stare a mammoth task of reaching out to them.

Banks say call centres are also working on extremely thin capacities. “Reaching out to customers through call centres may take a very long time,” says the retail head of a private bank.

It is also not just about getting the consent but also properly informing the customers that moratorium will mean loan tenure getting extended by three months, which will entail corresponding interest charges and accordingly getting their approval is the key challenge.

Bankers say the staff strength at call centres could be as thin as just 10–30 per cent of optimum capacities. Most banks say they will send out SMS and emails to their customers but how many will respond to their digital communications is a question mark. “Success of the moratorium will depend on how many of the customers react to our messages and email,” said another banker. Also, unlike in 2016 (during demonetisation), this time banks will have to digitally document the customers’ consent and store it.

As teams in the back-end operations mostly work from home, bankers say there could be some delay in completing the necessary paperwork for the moratorium. But here’s the larger debate. The RBI has given authority to banks to decide which customers should be given the dispensation for payment of instalments. Experts say this itself may result in differentiation between customers, particularly in the retail side. “If banks were to take a call on who should get the leeway and who should not, it could have different implications at a later date,” said a senior executive of a private bank heading the retail division.

To mitigate any differentiation in customers, it is anticipated that public sector banks could give a blanket moratorium to all customers, while those in the private space are still deliberating on how to implement the moratorium. SBI Chairman Rajinsh Kumar has clarified the moratorium will be automatically extended to all customers. Another managing director of a PSB says most of the state-run banks will follow SBI’s decision. However, a similar clarification is awaited from most private banks. “We are still considering how to go about with implementing the moratorium,” said a retail banking head of a private bank.

Many public sector bank customers, despite a blanket extension, may not want a moratorium.

First Published: Sun, March 29 2020. 15:58 IST

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