The Reserve Bank of India’s on March 27 passed a circular, permitting all the lending institutions to allow a three moratorium period on payment of all installments falling due between March 1, 2020 and May 31, 2020.
A similar three-month deferment for all working capital loans to help borrowers tide over the coronavirus related economic hardships was also permitted.
The Reserve Bank of India (RBI) has now extended the moratorium until August 31, 2020 now.
However now, on issue of the interest rate waiver, the Supreme Court has told the Reserve Bank of India (RBI) that health is of greater importance as compared to the economy.
What is this Moratorium all About?
Taking the lockdown shutdown into consideration, The Reserve Bank of India (RBI) on March 27, in a press conference announced a moratorium of up to 3 months for loans outstanding as on March 1, 2020.
The three-month moratorium was on payment of all term loans due between March 1, 2020 and May 31, 2020. This was to help the borrowers from across the segments to tide over the crisis phase.
If you’re deferring payment of an EMI of, say Rs 1,000, and the bank is charging interest at the rate of 10% on outstanding sum, you’ll have to pay Rs 25 extra on each of the three EMIs that has not been paid during the moratorium.
This additional interest may either be added up to all your future EMIs or your loan tenure could get extended at the same EMI level.
The relief is that in case you take the moratorium you will not get reported to CIBIL as a defaulter. In other circumstances, if you had trouble paying and asked for the same extension, you would be a “restructured loan” or worse, a “non performing asset” – and that will hurt both the bank and you.
If you think you can avoid paying this month’s credit card bill, think again.
Supreme Court Slams the RBI
RBI sent an affidavit to the Supreme Court, saying that banking institutions and lenders will lose close to Rs 2 lakh crore, if interest is waived during the loan moratorium, which has now been extended up to August 31.
Supreme Court told the RBI regarding the interest waiver case that the economy is not higher than health of the people.
It has also said on news, “RBI is trying to sensationalize the issue by leaking to the media”.
The SC believes that allowing a moratorium period but not providing any relief in interest is more detrimental.
The Supreme Court noted that the Finance Ministry is assessing the issue of interest waivers. The top court will next hear the matter on June 12.