In a relief to borrowers, the Supreme Court in an interim order has asked commercial banks to extend the moratorium on loan repayments till September 28. The apex court has asked banks to not declare any loans a non-performing asset till further directions. The court has also granted the government, the Reserve Bank of India (RBI) and banks two weeks to file a reply on their stand on the waiver of interest charged during the moratorium period.
The Supreme Court (SC) bench headed by Justices Ashok Bhushan and comprising R Subhash Reddy and MR Shah was hearing petitions seeking interest waiver during the loan moratorium period. The hearing will resume on September 28.
After the country was hit by nationwide lockdown in the wake of Covid-19 crisis, the Reserve Bank of India requested the banks to give the facility of deferred payment of installments to borrowers till August 31 for all term loans, including home, car and personal loans. The moratorium scheme ended on August 31. Both private and public sector banks offered the moratorium option to their customers.
The moratorium was only offered as EMI deferral, and the interest continued to accumulate on the outstanding principal. It was aimed at helping stressed borrowers who were unable to earn a living due to the lockdown.
BankBazaar CEO Adhil Shetty said, “The Supreme Court’s interim order extending the moratorium until 28 September brings relief to people who have been struggling with their cash-flow due to the pandemic and lockdown. However, borrowers should keep in mind that even now, availing the moratorium means that the interest continues to be levied against the outstanding amount that keeps increasing month-on-month. A three-month moratorium can cause the loan tenor to increase by as much as a year, especially if availed in the early days of the loan. So, it is recommended that you should opt for the moratorium only if you have exhausted all other alternatives.”
BankBazaar.com, India’s leading online marketplace for loans and credit cards.