Norms for moratorium
While the moratorium affords a genuine relief for some business entities impacted by the outbreak, the lack of ability of banks to determine and fix eligibility criteria or parameters for granting such dispensation seems to be a larger policy issue.
It is widely believed that banks being unable to independently evaluate each borrower account and having to grant moratorium merely on account of Covid-19 (and having to disregard past antecedents of a case) creates stress for banks especially at a time of when they are facing a liquidity crunch given their own reduced cash inflow.
The change in the RBI’s intent on applicability of moratorium and April 17 policy on Covid-19 Regulatory Package – Asset Classification and Provisioning, provided an augmented stimulus permitting borrowers to defer their EMIs in relation to their loans prior to March 27 even in cases where such loans were under default (but not a non-performing asset).
The benefit of moratorium of past and future EMIs has also been engaged by borrowers, till the extended term of August 2020, who have been in serious debt crisis even long before the onset of Covid-19 to use this opportunity to keep lenders at bay till they have identified solution without the enforcement threat.