RBI’s 3-month EMI moratorium could provide ₹2.1 lakh crore liquidity to companies

The findings by Crisil Ratings are based on assessment of 9,300 of its rated non-financial sector companies across 100 sectors.

The Reserve Bank of India (RBI) logo is pictured outside its head office in Mumbai May 3, 2011. India's central bank raised interest rates by a sharper-than-expected 50 basis points on Tuesday and said fighting inflation is its priority, even at the expense of short-term growth. The rate rise was its ninth since March 2010, and exceeded market and economists' expectations for a 25 basis point rise, although the case for stronger action had been building since March headline inflation reached nearly 9 percent. REUTERS/Danish Siddiqui (INDIA - Tags: BUSINESS)

The Reserve Bank of India’s three-month suspension of EMIs could provide a liquidity breather of ₹2.10 lakh crore if all corporates avail it, says a report.

The findings by Crisil Ratings are based on assessment of 9,300 of its rated non-financial sector companies across 100 sectors.

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It said sectors with higher leverage, such as power-, telecom-, roads-, textiles- and fertilizer sectors, will be the major beneficiaries and account for nearly 47% of the total breather available.

The moratorium announced by RBI on interest and principal obligations due between March 1 and May 31, 2020, would tantamount to a liquidity breather of ₹2.10 lakh crore if all companies opt for it, the rating agency said in a report.

The amount is arrived at by considering total principal and interest falling due in the three-month period, it said.

While the moratorium provides substantial benefit to India Inc, actual salary payments will depend on liquidity available on the day of the payout, it said.

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Companies into information technology consulting and automobile makers have low leverage and will gain relatively less from the moratorium, the report said.

But they typically maintain high liquidity, which can be used to pay salaries, the rating agency said.

All companies will substantially benefit from the moratorium as the median salary cover is 0.65 time. About 40% of them even had a cover of over one time, indicating the benefit from moratorium exceeds employee cost during the lockdown , its senior director and head analytics Subodh Rai said.

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These companies are from sectors such as electricity generation, agricultural products and trading and have high financial leverage, which maximises their gains from moratorium, but relatively low employee-cost intensity, Mr. Rai said.

The report further said automobile dealerships could face some challenges in salary payouts despite materially benefiting from the moratorium. That is because, continuing slowdown in the automobile industry and complete halt in operations because of the lockdown have severely impaired their liquidity, it said.