3 mth extension on bank loan moratorium likely

The further extension of the nationwide lockdown till May 17 has made the Reserve Bank of India to consider the extension of the moratorium on bank loans by another three months. This comes amid suggestions from various quarters, including from Indian Banks’ Association, for the further extension of moratorium.

On 27th March, the RBI had said “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.” Consequently, individuals’ EMI repayments of loans taken were not deducted from their bank accounts.

Experts from the industry are worried that with cash flow drying up, many entities and individuals will be unable to service their debt in this circumstances at the end of the present moratorium period ending on May 31. Extension of moratorium by another three months would be a practical approach from the regulator, in the light of these circumstances.