Current Affairs Compilation : 2 September 2020
Why in News ?
Solicitor General appearing for the Union government and the Reserve Bank of India, informed the Supreme Court that the Loan moratorium is extendable to two years. It was introduced during the lockdown.
What is Loan Moratorium
Moratorium is a buffer period to restart the repayment of loans. Loan repayment usually starts as soon as the loan is granted. Moratorium is a certain period of time before the re payer must start paying his fixed monthly mortgage payment by a certain date of the month.
Education loan has a moratorium period ie once the students completes his/her studies only then the repayment starts.
Need for Moratorium
- Economy has contracted by 23 per cent due to the pandemic.
- Moratorium will help the re payer a period for the payment when the economy recoup.
- The moratorium can be optional if you are facing severe financial crunch.
Impact of Moratorium in the long term : It can give you short-term relief but in the long term it can cost you some burden. Because, during the period of moratorium, interest will continue to be levied on the outstanding loan.
- Supreme Court earlier direct the Centre to clarify its position on the waiver of interest during the loan moratorium on loan and other repayments to banks.
- The Reserve Bank of India had introduced the measure initially for three months, since extended to protect borrowers hit by the Covid-19 and lock down. It has argued that interest can’t be waived.
Source : The Hindu
Topic
GS II : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment