Loan moratorium still ends on Aug 31 while Supreme Court gives the government another week to clarify if accrued interest should be waived

• Whether or not interest from the moratorium period will be waived off is yet to be decided by the Supreme Court.
  
• The apex court has given the Indian government another week to clarify its stance on the issue.
  
• As things stand, the collective interest will be due starting September 1 for borrowers.
  

The government has another week to decide whether interest that loans built up during the last six months will be waived off. But for borrowers, the moratorium is officially going to end on August 31. This means that irrespective of what the Supreme Court decides on the day, payments will be due starting September 1.

“Moratorium ends on August 31. As on September 1, we will be in default,” senior advocate Kapil Sibal told the bench headed by Justice Ashok Bhushan.

If interest is, in fact, renounced then the Reserve Bank of India (RBI) estimates that banks will lose nearly ₹2 lakh crore in its argument to not waive interest on loans.

The Supreme Court observed that the government has ample powers in the Disaster Management Act (DMA) to waive the additional interest on borrowers added during the moratorium.

The crux of the case
The RBI allowed customers to avail moratorium on loan instalments that fall between March 1 to May 31 — which was then extended to August 31. The same circular also highlights that the interest chargeable during the moratorium period will be added to loan instalments that are due once the relaxation comes to an end.

The added interest burden is what is being contested by the plea.

The government’s dilemma
It argues that if the aim of the moratorium was to provide relief on account of the loss of livelihood, then the interest burden defeats the purpose of allowing relief. If those suffering from income loss weren’t able to pay interest over the last three months, it’s unlikely that they will be able to pay it once the moratorium is over.

The Supreme Court told the government that it shouldn’t only think about business, but also about the plight of the people on the ground. Even if the stand of the RBI is aligned with the industry, it doesn’t mean the government should hide behind the apex financial institution. Given the options at its disposal.

India’s top court had earlier given the government two weeks to file a reply, failing which it has been given another week to clarify its stance.

What are the borrowers’ options if their payment is due?
If you haven’t availed the moratorium, nothing changes. Your monthly payments continue as in and there is no change in your overall loan payments scheme.

If you have availed the moratorium and continue to face a financial crunch, then you can speak to your bank about restructuring your loan. Within the options of restructuring, it is possible to appeal for your moratorium period to be extended until you have the money to start paying.

For those who have availed the moratorium but have a little wiggle room, experts advise that one should instead go for a one-time payment instead of letting interest accrue even further.

Another plea was also filed with the Supreme Court by lawyer Vishal Tiwari seeking to extend the moratorium period to December 31 — a move that Indian banks and the RBI have strongly advised against.

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If you have a bank loan that you are unable to pay, restructuring is on its way