11 Clarifications On Loan Moratorium: And A Calculator

What is the loan moratorium scheme?

The RBI had issued a moratorium scheme on March 27 allowing banks and lending institutions to grant a moratorium on payment of interest, principal and EMI payments falling during the period March 1 to May 31, 2020. This period was subsequently extended until August 31, 2020.

What is a loan moratorium in India?

"Moratorium for payment of interest and/or principal with or without extension of the remaining term subject to the maximum stipulated in the scheme, is offered in the case of term loans," says Babu K A, Senior VP & Head, Loan Collection & Recovery Department, Federal Bank.

What is a loan moratorium for example?

A moratorium period is a time during a loan term when the borrower is not required to make any repayment. It is a waiting period before which repayment of EMIs resumes. Normally, the repayment begins after the loan is disbursed and the payments have to be made every month.

Is loan moratorium good or bad?

Deposits that a bank borrows at a certain rate of interest are lent at a higher rate of interest. Only when interest on loans is paid can interest on deposits be paid. Thus, not charging interest on loans under a moratorium is a bad idea, especially when deposits remain a major form of saving for the common man.

Who is eligible for a moratorium?

Borrowers with MSME loans, education loans, housing loans, consumer durable loans, credit card dues, automobile loans, personal loans and consumption loans will be eligible, provided that the loan accounts have sanctioned limits and outstanding amounts not exceeding Rs 2 crore as of February 29, 2020.

Is interest paid during the moratorium period?

The apex court furthermore directed that there shall be no interest on interest or penal interest on any amount during the loan moratorium from any borrower. ... The moratorium was intended to provide borrowers relief during the COVID-19 pandemic, enabling them to defer payments on EMIs.

Is the moratorium still available?

Borrowers who did not avail of last year's moratorium Last year, the RBI announced a loan moratorium framework that allowed borrowers to opt for a moratorium of 3 months in phase 1 from March 1, 2020, to May 30, 2020. Later, it extended the moratorium by another 3 months till August 31, 2020.

Sample Loan Moratorium Interest accrued calculations 

What is a moratorium by RBI?

This measure was taken by the central bank to provide some relief against the covid-induced financial crisis. The extension of the three-month EMI moratorium on repayment of term loans means that borrowers will not have to pay their loan EMI instalments during such a period as prescribed by the RBI.

The Supreme Court, on June 11, 2021, rejected a petition that requested India’s apex court to give directions to the centre to offer a loan moratorium, keeping in view the monetary stress caused by the second wave of the Coronavirus pandemic.

What if you already availed of a loan moratorium?

Those borrowers who opted for the loan moratorium 2020, are also eligible to get the benefit under the second moratorium. However, the remaining tenure can only be extended up to two years.

“In respect of individual borrowers and small businesses that have availed of restructuring of their loans under the resolution framework 1.0, where the resolution plan permitted a moratorium of fewer than two years, lending institutions are being permitted to use this window to modify such plans, to the extent of increasing the period of the moratorium and/or extending the residual tenor up to a total of two years. Other conditions will remain the same,”