Moratorium and restructuring
- September 2, 2020
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Subject: Economy
Context:
The Centre informed the Supreme Court that moratorium on repayment of loans allowed during the Covid-19 crisis can be extended by up to two years.
Concept:
- On 27th March, 2020, the RBI announced a three-month moratorium (1st March to 31st May) on loan and card repayments. Again extended for three months till 31st
- During moratorium the customer does not have to pay EMIs and no penal interest is charged. It is not a concession, but a deferment of payment to provide some relief to borrowers facing liquidity issues.
- RBI is looking to rebalance the debt burden of borrowers and has therefore announced the loan restructuring scheme.
- Restructuring is a practice that allows banks to modify the terms of the loan when the borrower is facing financial stress.
- Banks do that to avoid the borrower being declared a defaulter and the loan having to be classified as a non-performing asset.
- It could be through a change in the repayment period / repayable amount / number of installments / rate of interest/ additional loans.