The decision of the Supreme Court in the Lone Moratorium case is going to come today. On 17 December, a bench headed by Justice Ashok Bhushan reserved its decision during the hearing of the case. In view of the coronavirus epidemic, the Reserve Bank of India announced the Moratorium last year, giving relief to the people taking loans. Under this, between 1 March 2020 to 31 May 2020, people were exempted from giving EMI of term loan. Later this period was extended till 31 August 2020.
The central government had decided to waive interest on loans up to Rs 2 crore under 8 special categories. MSME, education, housing, consumer durables, credit cards, automobiles, personal and consumption were included in these 8 categories. Last November 27, the Supreme Court had asked the Central Government to take all necessary steps to implement this decision.
Declaration of loan restructuring facility
The central bank has also announced the facility of loan restructuring once. It also said that if the loans taken by companies and at the individual level default this period, then they will not be declared non-performing assets (NPA). Only those loan accounts will get the opportunity for restructuring, companies or individuals whose loans have defaulted for at least 30 days till March 1, 2020. The deadline of 31 December 2020 was fixed for resolution with banks on loans taken by companies. Banks have to implement it by 30 June 2021.
What was the condition of restructuring for personal loans
Banks had a chance to start resolution by 31 December 2020 for personal loans. The deadline to implement it was also fixed within 30 days of the resolution. Loan accounts that are standard and have not defaulted for more than 30 days till March 1, 2020, will also be eligible for restructuring.
Now RBI is not in the mood to relax policies
According to a Mint report, it is believed that the Reserve Bank may reject the banks’ request to provide interest relief to borrowers with working capital. The RBI is now moving towards reducing the decisions taken during policies during the epidemic. In the report quoting three people who are aware of this matter, it has been said in view of the current state of the economy and the way forward, the RBI is taking such steps.
NBFC’s position strengthened by the decision not to pay a dividend
In a recent banking report, the RBI has said that non-banking financial companies (NBFC) can be adversely affected due to loan losses and low credit demand. Since there is no change in loan moratorium and asset classification, the asset quality of these NBFCs has improved. However, many NBFCs have made additional arrangements under the credit loss estimates. RBI has said in a report on the banking sector for 2019-20 that their capital position has also improved with the decision to give the dividend.
Fewer NBFC customers take advantage of Moratorium
Overall, this report states that the number of customers availing loan moratorium in NBFC is less. On the other hand, the total outstanding loan amount under the moratorium in commercial banks is very high. This clearly shows how much pressure these banks have on the asset. It said that till August 31, 2020, only 26.6 per cent of the total customers in NBFCs availed loan moratorium. About 44.9 per cent of the total loan given by them was in the scope of the moratorium.
This report of RBI also said, ‘Due to the stability in loans for NBFCs, their total consolidated balance sheet has seen a decline. However, worsening macroeconomic conditions and weak demand have increased their risk.