Major Reasons Why The Request For a Moratorium Can Be Denied?
April 22, 2020

In the current state of health concerns and economic turmoil due to the spread of the Corona virus, the announcement of the Moratorium by the RBI comes as a shot in the arm.

Considering the uncertain road ahead and applying for the waiver if for even a month even seems like a good option to conserve finances. If requested for the grace period there is a chance that the Lender may or may not apply the request.

Listed below are some of the factors that can influence the implementation of the request:

The final decision to apply the moratorium rests with the Lender.

As per the RBI mandate all kinds of loans whether secured or unsecure and Credit card payments are to be allowed the moratorium or grace period for repayment of EMI for 3 months.

While Public sector Banks are obliged to apply the RBI mandate to comply with the request, the application details of the moratorium will vary as per the individual policy of the Bank & NBFC.

Variables could be applied as per the terms and conditions of the Lender, depending on the type of Loan and the profile of the applicant.

A moratorium may not be given if the salary is regularly credited.

Due to the lockdown and no economic activity employers all over are facing a financial crisis. Though the government has announced relief measures and requested employers to continue paying salaries, many individuals may lose their jobs as companies go under: it is for the relief of these persons that the moratorium has been announced.

For employees whose salary is being credited to the Bank account consistently, the Lender will find no reason to allow the grace period and not deduct the EMI as per schedule.

The Credit history or CIBIL score of the individual.

If the Bank feels that the applicant holds too many Credit lines, giving a grace period for repayment of the EMI will encourage a default. Permitting a moratorium on one repayment will help the applicant, but allowing on multiple credit lines will make it impossible for the customer to repay the collective interest.

How is the repayment track of the Loan or Credit Card held by an individual?

If a Customer has been repaying the EMI’S of the loan regularly and all Credit card bills on time the lender will have confidence that the customer will repay the loan as per the extension given. If the customer has recorded defaults or delays in the repayment of current loans, or Credit card payments the lender may not deem it prudent to extend the moratorium.

Financers too have to safeguard their interests while issuing a moratorium.

Banks, NBFC’S and other lending institutions are under extreme pressure with the impact of the Lockdown. The Liquidity and rotation of funds are an issue as salary credits may be delayed, SME’S are not working or generating any income and the overseas payments have stopped.

The government & RBI have promised help measures to infuse funds into the system and lower lending rates. Taking into account the time period before the assistance takes effect and some semblance of working returns, financial institutions will safeguard their own interests before offering their customers concessions such as a moratorium for repayment of the EMI.

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