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The Supreme Court extended the loan moratorium period till 28 September. The only intention is to grant relief to the borrowers and asking the banks not to declare the accounts as NPA who are unable to pay the EMI. The court has granted two weeks to the Centre and RBI to place everything before any decision is taken in this context, to the court. It is believed that both bodies will actively consider all the aspects and bring a final solution. Further, the bench made it clear that it is the last chance for the RBI and the government, thereafter, they will not consider this matter suspended.

In this reference, Moksh Popli states that the period of the last six months has been difficult for everyone on different grounds. Whether it is an established business, a startup, a farmer, salaried, student, or anyone, all are fighting with the odds. This loan moratorium came up as a big relief for the ones who were facing scrunches and monetary disasters due to lockdown. It was hard to arrange finance for EMIs with additional expenses, like food, school fees, electricity, medical bills, etc.

Of 31st August, everyone is looking for a relieving announcement from the court or the RBI. In the meantime, huge amounts have been disbursed to aid the dying businesses, the banks are working to reconstruct the loans, on debt resolution plans, etc. Moksh Popli is an enthusiast business consultant and an IT expert. He says that today, many of us are in doubt regarding the basic concept and the difficulties of loan moratorium. People are still unaware is it good or bad, should they take this opportunity, what will be the interest on the moratorium?

Is a loan moratorium good or bad?

He says that taking the benefit of the loan moratorium is an optional arrangement, it is not forced on anybody. It came as a relief from the RBI. In case, you are not facing the crunch anymore, then do not choose it. It is a deferral for a short time, do not consider it as a loan waiver. The banks will charge interest on the unpaid amount in the end. This step is a relief from RBI to give a surface to the cash flow, it should not be taken as a discount on payable amounts. Moreover, if you opted for a moratorium, then you will not be asked to pay any extra charges, however, interest at the existing rate will be charged on the principal amount that is outstanding after the interim period.

Moksh Popli further detailed that in case the borrower is not in the condition to still pay the EMIs, then the bank will increase the interest rate/ or levy additional charges on the loan. It will also end into a lower CIBIL score that affects future debt ability. It is good to be wise and take advice from the experts or the lender directly.