Pressure on profitability unlikely, believe banks

SMALL PORTFOLIO SIZE OFFERS RELIEF

- KSHIPRA PETKAR & MAHESH NAYAK

THE RESERVE BANK of India's (RBI) decision to extend the moratorium period for export credit, from 270 days to 450 days is unlikely to hit banks'bottomlines. "These measures are at a much smaller scale, only targeting exporters who have some outstanding loans as of August 31," said a senior banker from a state-run bank.

He highlighted that this is not comparable to the Covidera moratorium, which covered a broader spectrum of loans and included additional credit guarantees. "Export credit is only a very, very small part of the overall bank loans portfolio, hardly ₹2 lakh crore vis-àvis ₹170 lakh crore of overall outstanding,"he added.

While banks may need to make a standard 5% provision on deferred loans, the impact on profitability is expected to be negligible. The scheme offers a four-month moratorium on export credit repayments due between August 31 and December 2025, with accrued interest payable by March 31, 2026.