RBI May Extend Moratorium On Loans By Another 3 Months

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New Delhi– With the further extension of the nationwide lockdown, the Reserve Bank of India (RBI) is considering a proposal for extending the moratorium on bank loans by another three months to help people and industry impacted by the ongoing lockdown to contain COVID-19.

Suggestions from various quarters, including from the Indian Banks’ Association, have come for the further extension of the moratorium and the RBI is actively considering them, according to sources.

The government, on Saturday, extended the lockdown for further two weeks till May 17 with certain relaxations in red, orange and green zones.

Income stream would not resume due to the continuation of the nationwide lockdown, the sources said, adding that so many entities and individuals would be unable to service their debt in these circumstances at the end of the present moratorium period ending on May 31.

So, the extension of moratorium by another three months would be a practical approach from the regulator, a senior public sector bank official said. It will help both borrowers and banks in these difficult times, the official added.

The RBI had, on March 27, allowed banks and financial institutions to offer a moratorium of three months on payment of instalments of all term loans outstanding as on March 1 to help mitigate the hardship faced by borrowers.

“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,” the RBI had said.

Accordingly, it had said the repayment schedule and all subsequent due dates, as also the tenor for such loans, might be shifted across the board by three months.

As a result of this moratorium, individuals’ EMI repayments of loans taken were not deducted from their bank accounts, providing much-needed liquidity.

The loan EMI payments will restart only once the moratorium time period of 3 months expires.

RBI Governor Shaktikanta Das, on Saturday, held a meeting with public and private sector banks where the issue of loan moratorium was also reviewed.

Credit flows to different sectors of the economy, including liquidity to non-banking financial companies, microfinance institutions, housing finance companies, mutual funds, etc, and post lockdown credit flows including the provision of working capital, with special focus on credit flows to the MSMEs were also deliberated.

The Supreme Court, earlier this week, directed the RBI to ensure that its March 27 guidelines, directing lending institutions to allow a three-month moratorium to all borrowers, is implemented in letter and spirit.

 

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