Salaried borrowers mostly sticking to EMIs

Most MSMEs have opted for loan moratorium, say bankers

The option of a moratorium on loan repayments that was announced by the Reserve Bank of India last month has mostly been availed by micro, small and medium enterprises while salaried class borrowers have, till now, largely refrained from availing the facility, bankers 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 all 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 the loan moratorium,” the chief executive officer of a public sector bank told The Hindu, speaking on the 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 moratorium,” 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 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 a moratorium would have to incur a cost as the interest, which has not been paid in these three months, would be added to the principal component.

“Some borrowers from the micro and medium enterprises have opted [for it],” said the managing director of another public sector bank. “But personal loans, term loans like housing loadns and vehicle loans, credit card loans, which carry higher rate of interest… many people have not opted [for a moratorium].

“In any case, the interest meter is running,” the official added, indicating that those who are in a position to repay ha not opted for the moratorium since they were aware of the cost.

Some private sector lenders, including housing finance companies, however, are still entertaining requests from their customers on the moratorium issue.

“A clear picture on how many of the salaried borrowers have availed themselves of the moratorium will emerge after some time, as customers still have some more days to indicate their choice,” an official from a private sector lender said.

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