The Bold Step of RBI: 3 Months Increase in Moratorium on Loans

NBFCsWith the global pandemic on the rise, the Indian bank’s association has proposed an increase of moratorium on loans to aid the industry and people who being adversely impacted in the present scenario. RBI is reviewing the suggestions to facilitate the economy during this nationwide lock down.

The Prime Minister announced lock down 3.0 with the nation being divided into red, orange, and green zones on the 1st of May. Previously to ease the burden of debt, the RBI on the 27th of March, had increased the moratorium on loans for 3 months on all term loans outstanding as on the 1st of March. This attempt came as a sigh of relief both for the borrower and the lender in this unnatural times.

 The RBI quoted “All commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all -India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) (“lending institutions“) are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020,”. 

According to a senior public sector bank official, the further increase of moratorium on loans seems to be a practical approach to safeguard the back of the economy- the lenders and the borrower. Repayment schedules and due dates of loans need to be shifted by another quarter of a year.

The RBI governor Shashikanta Das has discussed the proposal of an increase in the moratorium on loans term period with senior public and private sector bank officials. During the meeting credit flows to the different sectors including post lock down credit flow of provisions of working capital and MSMEs were discussed.

As during the ongoing term period, EMI payments for loans were not deducted, providing the much-needed liquidity. The Supreme Court via the RBI also ensured that the lending guidelines are implemented in letter and spirit.

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