Money & Banking

Don’t extend loan moratorium beyond August, says Deepak Parekh

Our Bureau New Delhi | Updated on July 27, 2020 Published on July 27, 2020

HDFC Chairman Deepak Parekh

Deepak Parekh, Chairman of HDFC, on Monday strongly advocated for not extending loan moratorium beyond August 31.

“Please do not extend the moratorium because we see that even people with ability to pay, whether individuals or corporate, are taking advantage of this and deferring moratorium,” Parekh said during a webinar with RBI Governor Shaktikanta Das organised by CII. Further he mentioned about talks regarding further extension of loan moratorium by three months. “It hurts us and hurts the smaller NBFCs particularly,” he said.

Das expressed his inability to comment on the suggestion but said that he noted the suggestion. Das will give a clear view about any decision on extending moratorium after next meeting of Monetary Policy Committee which can take place soon. The last meeting took place on May 22 and normally there is gap of two months between two meetings.

On March 27, the RBI permitted all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020. Again, on May 22, , according to RBI, in view of the extension of the lockdown and continuing disruptions on account of COVID-19, it has been decided to permit lending institutions to extend the moratorium on term loan instalments by another three months, i.e., from June 1 to August 31. Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, may be shifted across the board by another three months.

Simply speaking, this extension means deferment of EMI (Equated Monthly Instalments) and not waiver. Also, any borrowers availing this scheme would be required to pay additional EMIs and thus additional payment. For example, as per SBI, for a auto loan of Rs.6 Lacs with a remaining maturity of 54 months the additional interest payable would be Rs.36,000 approximately equal to additional 3 EMIs. Similarly, for a home loan of Rs. 30 Lacs with a remaining maturity of 15 years the additional interest payable would be Rs.4.54 approximately equal to additional 16 EMIs.

There has been mixed response to this scheme. Some banks have seen good number of people going for the scheme while some banks saw lesser number. There is a section in the industry which bats for further extension. During the same event, in which Parekh said, Rakesh Bharti Mittal, Vice Chairman of Bharti Enterprises, feels that moratorium extension should seriously be considered as economy continues to be under severe stress.

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Published on July 27, 2020
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