Moratorium terms pose several questions in Kerala

SLBC for January 31 cut-off date for ‘Standard’ loans; Banks including Federal Bank set Feb 29 as cut-off date; Kerala CM for dropping the ‘Standard’ clause


THIRUVANANTHAPURAM: The recently announced loan ‘Moratorium’ scheme is facing hold-ups even before its take off, especially in Kerala, due to conflicting terms and conditions attached to the programme by different parties involved in it

Certainly, the devil is in the detail.

Even before the Reserve Bank of India (RBI) could announce moratorium for three months in the country, the State Level Bankers Committee (SLBC) in Kerala had consented to recommend moratorium for all loans in Kerala for one year following its meeting on March 17 with the chief minister of Kerala, Pinarayi Vijayan.

But the SLBC had attached a condition that only loans that remained Standard – means without any defaults – as on January 31, 2019 would satisfy for moratorium, whereas the Kerala CM wanted the ‘Standard’ condition to be dropped while considering loans for moratorium.

For any action to be implemented, the SLBC needs RBI”s approval.

The complexity of the situation arises from the fact that on the one hand, RBI is unlikely to give the nod for a full year moratorium for Kerala as it will obviously be in conflict with the decision taken by the central bank for the whole country.

The more vexing scenario arises from the curious situation created by the stand taken by banks including Federal Bank requiring the cut-off date for defining ‘Standard’ loans to be further pushed to February 29, 2019 instead of January 31 recommended by SLBC. RBI is understood to have given a free-hand to the banks to decide on such details.

The situation will get more acute if the SLBC, the official body for bank branches operating within Kerala, wants to listen to Kerala CM who wants the clause of ‘Standard’ loans to be summarily dropped from the caveats and extend the moratorium to all aggrieved borrowers in the state.

Another condition that has infuriated the distressed borrowers is that the interest accrued on the loans during the moratorium period needs to be paid by the borrowers themselves, albeit in the future.

“Moratorium shall be extended to term loans in standard status as at the end of February 29, 2020. Interest shall continue to accrue on the outstanding balance of term loans during the moratorium period at the contracted rate,” Federal Bank has stated in its website.

Kerala CM argues that this will be too cumbersome for the unfortunate borrowers in the state, which has been devastated by two consecutive floods and Covid 19, this time.


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