'Loan moratorium amid COVID-19 pandemic not helping the salaried', feel experts

While bankscharge a fee on borrowers if they miss paying their EMIs on time, they are not allowed to levy from borrowers whose moratorium request has been approved.

Published: 03rd August 2020 09:05 AM  |   Last Updated: 03rd August 2020 09:05 AM   |  A+A-

Home loan

For representational purposes

By Express News Service

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.


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  • Manu S Hegde

    People who continue to repay their loans are indeed stupid. Loan moratorium is bound to be extended for upto an year as a populist move. With state election in many big states coming up within the next 10-20 months, one may even expect loans to be written off completely! Governments feel that doing what the public wants, is a very small price to pay, to win elections. After all, this is the game of democracy!
    2 months ago reply
  • saikumar

    Lot of people are job less and going debt ridden which is not an hidden agenda like banks or political parties.Appreciate the consumers need to get extension on the moratorium till the year end.Else due to debt ridden lot of people can take extreme steps.Yes it is difficult situation for the global economy to get stable but for this you can pressurize consumers .Here the middle class people are not getting any subsidy or an relief amount which been provided by other countries.
    2 months ago reply
  • Akshay

    Mortorium Need to extend please
    2 months ago reply
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