Sector-specific loan restructuring

The hospitality industry requests that loan extensions be given to the sector on similar lines as those given under the Prime Minister’s scheme for loans below `25 crore for SMEs and MSMEs in order to save the industry from imminent collapse.

Hotels and restaurants in India are once again on the edge with fears of state-wide lockdowns due to the rising number of COVID-19 cases. The hospitality industry has been engulfed in massive losses and mounting debts since the pandemic. In view of this, FHRAI is seeking a sector-specific loan restructuring plan from the government. It says that loan extensions should be given to the hospitality sector on similar lines as those given under the Prime Minister’s scheme for loans below `25 crore for SMEs and MSMEs. Provisioning this, the association has asserted, is the need of the hour for saving the industry from imminent collapse.

Gurbaxish Singh Kohli, Vice President, FHRAI, says, “The hospitality and tourism sectors of India are not a risk to the Indian banking system and need to be protected to prevent their assets from becoming non-performing. The total value at risk to the entire economy is close to 10 lakh crore with more than 50 per cent job losses within the industry. There is a justifiable fear that most of the hospitality businesses in this industry would be unable to service their financial obligations and eventually slip into the most distressed category. Owing to this, the industry desperately seeks support from the government and hopes that the government will soon make sector-specific tweaking in the policy to allow hospitality establishments to benefit from loan restructuring.”

Over the 18 months from March 2018 till September 2019, the Gross Bank Credit by the banks and financial institutions stood at `83,99,196 Cr which as on September 2019 increased by 14 per cent to `95,57,487 Cr – an increase of `11,58,291 Cr. The total outstanding to the service sector was `25,30,553 Cr while the credit for tourism, hotels and restaurants sector was `56,766 Cr which is only 0.58 per cent of the total deployment of Gross Bank Credit.
While the total Gross Bank Credit has increased in the country, the share of tourism, hotels and restaurants sector has come down from the 18-month period from 0.62 per cent to 0.43 per cent in the current Financial Year. FHRAI has stated that a favourable policy needs to be drawn.