Mandatory yet discretionary: Confusion prevails over EMI moratorium

For the past one month, Sandeep Kumar Sahoo has been emailing his lender to offer him moratorium. The 23-year-old student from Jamshedpur had taken a personal loan from an online platform that focusses on small-ticket loans to students.

Many like Sahoo have been asking lenders, especially non-banking financial companies (NBFCs), to defer their loan repayments. Each NBFC has adopted a different approach, while some gave moratorium in line with the Reserve Bank of India’s announcement, that is, twice for three months, some asked borrowers to keep applying for each month. There are others who are giving moratorium based on their discretion.

Banks, on the other hand, have offered moratorium to all customers who asked for it.

There is a difference in the way banks and NBFCs are offering moratorium. The difference in approach is due to the language of the notification. “The notification doesn’t say that giving a moratorium is mandatory,” said Veena Sivaramakrishnan, partner, Shardul Amarchand Mangaldas & Co.

Three NBFCs that Mint spoke to confirmed that it is not mandatory for lenders to offer moratorium according to their understanding of the RBI's notification. “Though it's not compulsory, we gave it to borrowers who reached out to us. According to the RBI regulations, we can’t report them as delinquent. So, even if the borrowers choose not to repay the loan, there is little we could do,” a chief financial officer of an NBFC said on condition of anonymity.

A chief executive officer of an online lending platform said that they are giving moratorium only if they believe that the customer needs it. “We are deferring repayments only for those who we believe are genuinely unable to repay,” said the CEO.

Banks, however, gave moratorium to all customers who opted for it as there were clear instructions from RBI. “Irrespective of the language of the moratorium, the regulator has instructed all lenders to offer moratorium to whoever asks for it,” said head of retail banking with a private bank who did not wish to be named. According to the banker, RBI had even asked each lender to provide details of the number of borrowers who have opted for the moratorium.

According to Sivaramakrishnan, while the notification doesn’t make it mandatory, the regulator doesn’t want lenders to use their “commercial judgment” to decide who needs it or who doesn’t. “Lenders have to follow the ‘spirit’ of the whole move. They must offer it to anyone who approaches them—they can’t use their discretion,” she said. This is the stand that the law firm has taken and advised their clients accordingly.

If you are in need of a moratorium and your lender is not offering it to you, writing to the regulator highlighting your case could help.