Salaried borrowers continue EMIs, ignore moratorium offer 

Bankers say that most MSMEs, though, have opted for it

18/04/2020 , MANOJIT SAHA, Mumbai

The option of a moratorium on loan repayments announced by the Reserve Bank of India last month has mostly been availed of by micro, small and medium enterprises while salaried class borrowers have, till now, largely refrained from it, bankers have said.

Last month, the RBI announced that banks and other financial institutions would give an option to borrowers of term loans for deferring payment of instalments falling due between March 1 and May 31, 2020.

The move was aimed at addressing the liquidity crunch faced by businesses and individuals due to the economic lockdown imposed to help contain the COVID-19 pandemic.

“About 85-90% of businesses in the MSME sector have availed of the loan moratorium,” the chief executive officer of a public sector bank told The Hindu, speaking on condition of anonymity. “This was expected as their business is down and [they] are facing a liquidity crunch,” the banker added.

“At the same time, we have not seen many individuals, who are salaried, availing themselves of the option,” the official said.

The bank CEO explained that the moratorium was imposed on repayment for all borrowers, except those borrowers who had availed of the standing instruction facility to pay the equated monthly instalment (EMI). Such borrowers were required to inform the bank if they wanted to opt for the moratorium.

“We have not seen many such individuals opting for the moratorium, which is understandable as their income flow has not been impacted,” the official said. “The government employees for example... why should they opt for moratorium since their salaries have not stopped?” the banker added.

Borrowers opting for the moratorium would have to incur a cost as the interest not paid in these three months would be added to the principal component.