Loan Moratorium: SC Bars Charging Compound Interest

The Reserve Bank of India (RBI) decided to provide some relief to individuals who repay loans. This came into place since the time of the lockdown. The RBI decided to allow banks to offer a moratorium on term loans for 3 months. A moratorium is primarily a scheme that allows borrowers to postpone the repayment of their loans. However, a moratorium is not a waiver. From March 1, 2020, to August 31, 2020, the Reserve Bank of India had agreed to allow banks to provide a moratorium of 6 months. However, many were aiming to extend this time period to December 31, 2020. The supreme court, however, agreed to extend the moratorium till the 5th of October, 2020.

The RBI and the Centre have agreed to waive the compound interest on certain categories during the loan moratorium period. A waiver of Rs. 2 Crores was agreed to be offered for MSME loans, education loans, housing loans, consumer durable loans, credit card dues, automobile loans, consumer loans, personal and professional loans.

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The current scenario on RBI’s EMI moratorium

Several experts in the banking industry, including the ones on the leadership board, believe that it is about time to lift the moratorium relief. This is mainly because of the improving condition since the initial stages of the lockdown. In addition, the RBI considers it to be very crucial to draft a recapitalization plan for both private sector banks and public sector banks. Currently, the moratorium scheme is no longer in action. Banks and financial institutions are planning to draft a restructuring scheme as an alternative.

Benefits of the moratorium to the public

Many individuals and borrowers experienced a great sense of relief once the RBI decided to allow banks to offer a moratorium. The moratorium was used by nearly 45% of the borrowers and most of them hailed from the Delhi-NCR region. In this set of borrowers, most of them were middle-aged and were either employed or were running a business. Many borrowers were under financial duress at the time. The moratorium scheme helped many in times of distress by providing them some time and space to make loan repayments.

Encumbrance Certificates

Instead of going through the complicated process of gathering information about a new property, it is more convenient to procure an encumbrance certificate. This legal document helps you understand the added costs that apply to the property. It helps you search for property details, financial and legal liabilities associated with the property. You can apply for an encumbrance certificate through a simple online process and get your certificate within 2 to 3 days. In case you choose to apply offline, you will get your certificate between 2 and 4 weeks.

Conclusion

Now that the moratorium has been lifted, banks and financial institutions are planning a restructuring scheme. In addition, the MHADA lottery is offering affordable home loan schemes. Besides, it is always recommended to have an encumbrance certificate to simplify the process of gathering property information. Finserv MARKETS can provide you with all the information you need regarding home loans, encumbrance certificates, and the MHADA lottery.