Review of Loan moratorium

Subject: Economy

Context:

The Supreme Court directed the Centre and Reserve Bank of India to review the moratorium scheme on term loans and create tailored schemes for various sectors.

Concept:

• Initially in March, the central bank had allowed a three-month moratorium from paying EMIs and other loans on payment of all term loans due between 1 March and 31 May.
• The central bank had on 22 May extended moratorium on term loans till 31 August amid the nationwide lockdown due to covid-19.
• Moratorium is simply not to pay EMIs for that time period and no penal interest will be charged. It is not a concession of any kind and is simply a deferment of the payment to provide some relief to borrowers facing liquidity issues.
• The interest would continue to accrue during the moratorium, which ultimately the borrower would have to pay.
• The petitioner argued that no interest should be charged during the moratorium because people are facing “extreme hardship”.