COVID-19 Relief: Loan Moratorium Can be Extended by 2 Years
As a COVID-19 relief measure, the Central Government announced that the moratorium period can be extended by 2 years.
The Central Government recently announced that the moratorium for loans can be extended by up to 2 years. This is the third announcement regarding the extension of the moratorium for loan repayment. It was first announced for three months on 27th March applicable from 1st March 2020 to 31st May 2020 and then extended for three more as announced on 22nd May and applicable from 1st June to 31st August. The moratorium was supposed to provide relief to people facing a cash crunch due to lockdowns.
As per the announcement, the borrower did not have to pay EMIs. And no penal interest (for non-repayment of loan) was charged during the extended moratorium period. Also, it would not affect the credit score of the borrower.
Yet, many financial experts had advised borrowers to repay the loan as per the repayment schedule, if possible. This was because the interest would still accrue on the loan principal and the overall debt burden would increase on the borrower. The option was only supposed to be exercised when loan repayment was not feasible.
This time, the apex court has asked the Centre to file an affidavit to waive interest entirely during the moratorium.
If this petition follows through then borrowers will not have to worry about the increased debt burden after the end of the moratorium. In that case, availing a loan moratorium will not be a bad idea at all. Whether that is a good thing for banks and the finance industry is another matter for discussion.
What do you think about the extension of the moratorium?