State Bank of India (SBI) chairman Rajnish Kumar said EMI relaxations and moratoriums provided by the Centre in order to lessen the financial stress on individuals due to the coronavirus lockdown has had no effect on the fiscal condition of banks.
In an exclusive interview with CNN-News18, he also divulged that banks are sitting on enough liquidity to lend money.
"Moratoriums and EMI relaxations will not deteriorate the bank's fiscal condition because not everybody has opted for the moratorium and there is no strain in our liquidity. We continue to be in surplus. There is no impact on the earning of the banks," said Kumar.
On being asked whether the announcements by Finance Minister Nirmala Sitharaman will affect the cash flow of the banks, he said, "All banks are sitting on comfortable liquidity and looking for lending the money. Particularly when there is the comfort of a guarantee by the government then the risk gets mitigated and the capital requirement by the banks also go down. So there is a very strong reason for banks to lend money."
Sitharaman on Wednesday announced six measures to revive micro, small, medium enterprises (MSME) that have taken a hit due to the lockdown implemented in order to curb the spread of Covid-19.
One of them being, Rs 3 lakh crore collateral-free automatic loans for businesses including MSMEs. Loans will be issued with four year tenor and moratorium up to 12 months on principal repayment. The Centre will also cap interests, the measure of which was not announced immediately.
Hundred per cent credit guarantee cover to banks and NBFCs on principal and interest will be provided.
"Government revenues have been impacted. In such a situation there is only one solution that the government borrows money. In such a situation they have to do some balancing act. One is that the government is trying to provide the risk capital to the banks and making use of the banking sector's capacity to leverage to put some money in the system," added Kumar.
On being asked about the sectors that are worst affected, he said, "Aviation, tourism and restaurants have been the worst affected. These are sectors which will take time to revive. Shopping malls have seen zero revenue, revenue for airports has become zero. Revival will take time because the strain of the virus is yet to be controlled."