The RBI has recently allowed all banks, NBFCs and HFCs to offer a 3-month moratorium for all term loan and working capital loan installments which are due for payment between March 1, 2020 and May 31, 2020.
Aimed at easing the liquidity crisis faced by borrowers amid the COVID-19 lockdown, the RBI has recently allowed all banks, NBFCs and HFCs to offer a 3-month moratorium for all term loan and working capital loan installments which are due for payment between March 1, 2020 and May 31, 2020.
This has surely given some relief to the borrowers facing financial hardship in current times. It should, however, be noted that moratorium refers to deferment of payment of instalments or the interest component; it is not a loan or interest waiver. Once the moratorium ends, borrowers will not only have to repay their outstanding dues but also the interest accrued on them during the moratorium period. However, those availing loan moratorium will not be reported to the credit bureaus.
Therefore, “as the interest accrual during the moratorium period will increase in the total interest cost for the borrowers, those with adequate cash flows should avoid the loan moratorium to the extent possible. And only those borrowers should opt for the moratorium who are unable to meet their repayment obligation because of cash flow disruptions caused by the lockdown,” says Naveen Kukreja, CEO & Co-founder, Paisabazaar.com.
It should also be noted that as the RBI has put the onus on the lenders to decide the moratorium’s terms and conditions, there is no uniformity among lenders regarding how the borrowers approach the moratorium. No wonder, some lenders are offering automatic moratorium relief to their borrowers while others are extending moratorium only when specifically demanded by the borrower.
For instance, SBI is giving relief only if the customer demands. However, automatic relief is given to the customers repaying their instalment manually. HDFC Bank is also giving relief only if the customer demands, while those skipping repayments are being considered by it as availing the moratorium.
On the other hand, ICICI Bank is giving automatic relief in case of 2 wheeler loans, business loans, farm loans, gold loans, jewel loans and other loans listed in the bank’s category A loans. For category B loans, such as car loans, home loans, personal loans, education loans, etc, relief is being given only on customer demand.
Some banks like Deutsche Bank and DBS Bank are giving automatic relief to their borrowers.
“Many lenders are also providing automatic relief to borrowers who will miss their repayment till May 30, 2020. All these things make it important for borrowers to keep a close watch on their lenders’ website as well as on any communication from their lenders’ end through SMS, email, etc. Many lenders are constantly updating their process for ‘opting in’ or ‘opting out’ of the moratorium since the RBI announcement,” says Kukreja.
Here is a list of how various banks and HFCs/NBFCs are allowing their borrowers to ‘opt-in’ or ‘opt-out’ of the moratorium: