The 90-day moratorium on all term loans to customers is a big relief for banks as well as for borrowers, but the industry’s first feedback is that the documentation process can cause difficulties.
Bankers anticipate operational challenges in communicating the Reserve Bank of India (RBI) waiver to clients, documenting their consent to exercise the option and the required supporting documents.
In the context of national foreclosure and banks operating on bare infrastructure, bankers say that some of the basic processes might be difficult to implement in the current scenario. For example, most branches operate with skeletal human resources to perform only basic work during the lockout period. “The steps in the branches have decreased considerably,” says Padmaja Chunduru, MD & CEO, Indian Bank. Unless customers approach the branches themselves, which could be difficult in a foreclosure scenario, banks set themselves the daunting task of contacting them.
READ ALSO: Impact of Covid-19: Private Equity slows down, zooms in on portfolio companies
To compound the problem, the banks say their call centers are also working on extremely thin capacity. “Reaching out to customers through call centers can take a long time,” says the retail manager of a private bank. Bankers say that the workforce in call centers could be as thin as 10 to 30% of optimal capacity. Most banks say they will send text messages and emails to their customers. “The success of the moratorium will depend on the number of customers who respond to our messages and emails,” said another banker. In addition, unlike 2016 (during demonetization), the banks will this time have to digitally document the consent of the customers and store it.
As the back-end operations teams work mainly at home, the bankers say that there could be some delay in completing the administrative formalities necessary for the moratorium. But here’s the broader debate. RBI has authorized banks to decide which customers should benefit from the payment down payment exemption. Experts say this can lead to differentiation between customers, especially in the retail industry. “If the banks were to answer the question of who should have the latitude and who should not, it could have different implications at a later date,” said a senior executive of a private bank at the head of the division. Retail. To mitigate customer differentiation, it is expected that public sector banks could grant a general moratorium to all customers, while private sector banks are still considering how to implement the moratorium.
Rajinsh Kumar, President and CEO of the State Bank of India (SBI) said the moratorium will automatically be extended to all customers. Another general manager of a public sector bank said that most state-owned banks will follow SBI’s decision. However, a similar clarification is expected from most private banks. “We are still thinking about how to proceed with the implementation of the moratorium,” said a retail bank official from a private bank.
As far as public sector bank customers are concerned, too, despite a general extension, there could be many who may not want a moratorium.