NEW DELHI: When the lockdown began, Kanika (name changed), a media professional, faced both salary cuts and delayed wage payments. She applied for a moratorium on her ongoing auto loan at Kotak Mahindra Bank.
The bank granted the moratorium for the months of April and May, to her relief, but did not do so from June. To her horror, she started receiving calls from recovery agents and requests to extend the relief were turned down.
Not just that, the bank also levied a penalty. Banks charge a fee on borrowers if they miss paying their EMIs on time. However, they are not allowed to levy these charges from borrowers whose EMI moratorium request has been approved.
In view of the pandemic and the subsequent lockdowns imposed, the RBI had permitted lending institutions to extend a moratorium on term loan installments from March to May, extended by another three months to August 31, 2020 later.
However experts argue that this moratorium, while give temporary relief, does not prevent the interest component of the EMI from getting added to the principal outstanding of the loan during the relief period.
This will result in an increase in EMI in the future and should be avoided, unless there isn’t a choice, they add. "Bank said it is their discretion if they give a moratorium or not. There were harassment calls. I had no other option but to finally withdraw from my Fixed Deposit," Kanika said.
While the government announced the moratorium, lenders are still using their discretion on which borrowers to extend it to, claiming that the fear of default is higher under the circumstances. "Mostly, we check the risk profile and, on the basis of that, moratorium is granted. There is a reluctance to give loans, especially to those in more vulnerable sectors," a senior banker from ICICI Bank said.
There is a provision to approach the RBI ombudsman, but petitioners are asked to approach the bank with a complaint first and wait for 40 days for the bank to sort the matter out. One of the reasons for such disparity in extending the moratorium is because there is no clear guideline on what one can do if a bank refuses to grant or extend the moratorium.