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With a further extension of the national blockade, the RBI is considering a proposal to extend the bank loan moratorium for another three months to help people and industry affected by the continued blockade to contain COVID-19.
According to sources, suggestions from various sectors, including the Association of Indian Banks, have come for a further extension of the moratorium and the RBI is actively considering them.
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On Saturday, the government extended the shutdown for two more weeks until May 17 with some relaxations for the red, orange and green zones.
The revenue stream will not resume due to the continuation of the national blockade, the sources said, adding that many entities and individuals will not be able to pay their debt in these circumstances at the end of the current moratorium period ending May 31.
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So extending the moratorium for another three months would be a practical approach for the regulator, a senior public sector bank official said.
It will help both borrowers and banks in these difficult times, the official added.
The Reserve Bank of India (RBI) allowed banks and financial institutions on March 27 to offer a three-month moratorium on the payment of installments on all outstanding term loans on March 1 to help mitigate difficulties facing borrowers.
“All commercial banks (including regional rural banks, small finance banks and local area banks), cooperative banks, all financial institutions in India and NBFCs (including housing finance companies and microfinance institutions) (“lending institutions”) are allowed to allow a three-month moratorium on installment payments on all outstanding term loans beginning March 1, 2020, “the RBI had said .
Accordingly, it had said that the payment schedule and all subsequent maturity dates, as well as the term for such loans, may change in three months.
As a result of this moratorium, the EMI repayments of the loans taken were not deducted from their bank accounts, providing the necessary liquidity.
EMI loan payments will restart only after the 3-month moratorium period expires.
RBI Governor Shaktikanta Das held a meeting on Saturday with public and private sector banks where the issue of the loan moratorium was also reviewed.
Credit flows to different sectors of the economy, including liquidity to non-bank financial companies, microfinance institutions, home finance companies, mutual funds, etc. Also deliberate.
Earlier this week, the Supreme Court ordered the RBI to ensure that its March 27 guidelines directing credit institutions to allow a three-month moratorium on all borrowers to be implemented in letter and spirit.
