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Moratorium option should be for all: RBI

April, 07th 2020
RBI says moratorium facility should be extended to all unless a borrower chooses to opt out of it. Many banks are offering the option to defer the payment of loan interest and principal only to borrowers who specifically ask for it. The move could put some of the banks with high credit- deposit ratio and NBFCs struggling to roll over liabilities in a spot. The Reserve Bank of India (RBI) on Monday reached out to several banks and non-banking finance companies to say that borrowers should be considered ‘under moratorium by default’ regardless of their opting-in or otherwise. The regulatory instruction, conveyed through emails, is very different from what many lenders have decided to follow. Many banks are offering the option to defer the payment of loan interest and principal only to borrowers who specifically ask for it. “But, according to RBI, it’s just the opposite. The 3-month moratorium should be given to all unless a borrower informs the bank or NBFC that he/she is not interested in availing the facility,” a senior banker told ET. The move could put some of the banks with high credit- deposit ratio and NBFCs struggling to roll over liabilities in a spot. These banks may face a liquidity crunch as the reduced inflow due to non-receipt of interest and loan repayment could be far more than the extra liquidity that would be available through lower cash reserve ratio and borrowing from RBI against gilts. NBFCs face a bigger dilemma. According to most banks, the RBI circular does not cover NBFCs. Under the circumstances while NBFCs which have borrowed from banks cannot benefit from the moratorium, they are under pressure to offer the facility to those which have borrowed from them. Instructions Different from Mar 27 Circular’ “RBI is quite categorical. For instance one of the emails make it clear that no demand should be made on borrowers or any recovery procedure undertaken by the bank or its agents for non-payment of amount due during the moratorium period. Thus, as long as borrowers fulfil the condition laid down in the recent RBI circular, they are eligible. Some of the banks were reluctant to extend the scheme to borrowers,” said another banker. Bankers say this is different from what RBI had indicated in the March 27 circular. The notification on the Covid-19 regulatory package said, “Lending institutions shall frame Board approved polices for providing the above-mentioned reliefs to all eligible borrowers, inter alia, including the objective criteria for considering reliefs.” Borrowers, however, are free to make repayments or service the loans at their own will even for dues of the moratorium period.