The six-month moratorium announced by the Reserve Bank of India ends on Monday and will not be extended beyond August 31. In March, the RBI first announced a moratorium on repayment of all loans and EMIs for a period of three months (till May 31) to help individuals and businesses hit by the COVID-19 pandemic manage financial constraints. This was then extended until August 31.
PTI reported on Saturday that the moratorium was only a temporary reprieve and that an extension could impact the credit behaviour of borrowers without resolving the issues being faced by them following the outbreak of the COVID-19 and increase the risks of delinquencies post resumption of scheduled payments.
In fact, several noted bankers such as the SBI Chairman, HDFC Ltd Chairman Deepak Parekh and Kotak Mahindra Bank Managing Director Uday Kotak were against the extension of the moratorium and asked the RBI Governor not to extend it beyond August 31. They said that many are taking undue advantage of the facility.
The moratorium meant that if a borrower was unable to pay his EMI until August 31, the bank will not classify it as a non-performing asset, and neither will it hurt his credit score or credit history. This includes all forms of retail loans, EMIs and credit card dues.
While extending the moratorium in May, RBI said that borrowers need not repay the accrued interest in one go to banks post the moratorium period. RBI allowed the accrued interest to be converted into a funded interest term loan, which will be fully repaid during the course of the due year ending March 31, 2021.
Meanwhile, a plea was filed by Agra resident Gajendra Sharma, who sought a direction to declare the portion of the RBI's March 27 notification "as ultra vires to the extent it charges interest on the loan amount during the moratorium period, which creates hardship to the petitioner being borrower and creates hindrance and obstruction in 'right to life' guaranteed by Article 21 of the Constitution of India".
Sharma has also sought a direction to the government and the Reserve Bank of India (RBI) to provide relief in repayment of loan by not charging interest during the moratorium period.
Hearing the plea last week, the the Supreme Court took note of the Centre's alleged inaction and asked it to clarify its stand within a week on the waiver of interest on deferred payments of instalments for loans during the moratorium period announced due to the coronavirus lockdown.
A bench headed by Justice Ashok Bhushan said the Centre had not made its stand clear on the issue despite the fact that ample powers were available with it under the Disaster Management Act and was "hiding behind the RBI".
Meanwhile, Supreme Court also that it will hear a fresh plea seeking extension of the scheme. This will be heard alongside the one filed by Sharma, on September 1.
On Monday, rating agency Crisil said that it analysed over 2,300 non-financial companies from portfolio that availed of the moratorium and that three out of four entities that availed of moratorium are rated in the sub-investment grade.
“Most of them were grappling with a slowing economy before the pandemic began. The severely curtailed business activity that followed in the first quarter of this fiscal had cramped cash flows, so the moratorium came as a big relief," ET quotes the rating agency as saying.
With PTI inputs