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  • Amidst fear of 2nd pandemic wave & possibility of lockdown, hospitality industry seeks sector specific loan restructuring plan

News Details

07 th Dec 2020

New Delhi, Dec 07: Hotels and restaurants in India are once again on the edge with fears of State-wise lockdowns due to the rising number of COVID19 cases. The Hospitality industry has been engulfed in massive losses and mounting debts since the pandemic hit the country. In view of this, the Federation of Hotel & Restaurant Associations of India (FHRAI) – India’s apex Hospitality Association is seeking a sector specific loan restructuring plan from the Government. The apex Association has opined 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 Rs.25 crores for SMEs and MSMEs. Provisioning this, the Association has asserted, is the need of the hour for saving the Hospitality industry from an almost imminent collapse.

“The hospitality and tourism sector of India is not a risk to the Indian banking system and it needs to be protected to prevent its assets from becoming non-performing. With existing travel restrictions, in February 2020, 1.01 million foreign tourists arrived in India compared to 1.08 million in February 2019, registering a year-on-year decrease of 6.6 per cent already. Since then, until date, there are no FTAs and are not expected anytime in the near future with fears of a second wave. The total value at risk to the entire economy is close to 10 lakh crores with more than 50 per cent job losses within the industry. There is a justifiable fear that most of the hospitality businesses companies 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 Govt. and hopes that the Govt. will soon make sector specific tweaking in the policy to allow Hospitality establishments to benefit from loan restructuring,” says Mr. Gurbaxish Singh Kohli, Vice President, FHRAI.

Over the 18 months from March 2018 till September 2019, the Gross Bank Credit by the banks and financial institutions stood at Rs.83,99,196 Cr which as on September 2019 increased by 14 per cent to Rs.95,57,487 Cr - an increase of Rs.11,58,291 Cr. The total outstanding to the service sector was Rs.25,30,553 Cr while the credit for tourism, hotels and restaurants sector was Rs. 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.

“Hospitality industry is a complex mix of logistics, supply chain, inventory management, kitchen production, and services and entertainment. Unlike traditional manufacturing industries, hotels require huge investments and capital outlays to set up and upgrade products, service design and technology. We are a highly labor and capital intensive business with long gestation periods of 15 to 20 years. Hence, when our industry is pegged against other sectors for lending, it is inequitable and not appropriate,” says Mr. Manav Goyal, Director, Adyar Gate Hotels Ltd, Chennai.

The FHRAI has stated that if a favourable policy is not drawn for survival of the Hospitality sector then at least 40 to 50 per cent restaurants and 30 to 40 per cent hotels in the country will shut down, resulting into millions of job losses.

“Businesses are steadily closing and the NPAs too are rising. Conservative projections show estimated revenues of only Rs.36,400 Cr against a total revenue of Rs.1.82 lakh Cr in FY 2019-20. This translates to a revenue loss of Rs.1.14 lakh Cr. The total loan outstanding to the Hospitality industry is Rs.55,000 Cr and the value at risk for the hospitality and tourism sector is at approximately Rs.10 lakh Cr without accounting for a second lockdown and its repercussions. Under such a scenario, the Hospitality sector needs Govt. support through a sector-specific loan restructuring plan. This will save many small and medium-size businesses from imminent and permanent closure,” concludes Mr Pradeep Shetty, Jt. Hon Secretary, FHRAI.

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