Coimbatore: While people from all sectors were initially happy about the Reserve Bank of India's announcement on the extension of EMI moratorium benefits for six months, industrialists have revealed the darker side of this announcement and have also given their suggestions to make it really worthy.
Coimbatore: While people from all sectors were initially happy about the Reserve Bank of India's announcement on the extension of EMI moratorium benefits for six months, industrialists have revealed the darker side of this announcement and have also given their suggestions to make it really worthy.
The 'Covid-19' virus outbreak has pushed each and every sector into unparalleled crisis. The livelihood of people has been affected greatly. In order to help the people and the industrialists who are reeling under severe financial crisis, the RBI extended EMI moratorium on loans, till August 31. However, to the shock of many, interest will be levied for this moratorium period.
At present, banks have given chances to their customers, either to make one-time payment of the accrued interest payable at the end of moratorium period or add the accrued interest to the outstanding loan and pay the same by increasing the amount of EMI to be paid for the rest of the loan tenure.
While this announcement gave a first impression of being very helpful, experts have revealed the darker side of it. They have also provided valuable suggestions to the government to make this initiative beneficial to the parties concerned.
The Tirupur Exporters Association (TEA) president, Raja M Shanmugam said, "The RBI initiative is welcomed. However, due to various ground level problems, this announcement has not earned a good response from the customers of banks.
This is a crucial time where the banks, industrialists and the government should work together. There is a workable plan for moratorium based issues. First, it should be extended for one year and banks should reduce the interest rate on the loans by 2%or 3%.
All banks should consider the current financial year as a non-profit one. The government should help by implementing interest subvention schemes to all sectors. The remaining interest burden should be borne by the industrialists. For example, banks levy 9% interest rate for an industry loan.
It is suggested that 3% interest burden should be borne by the respective banks, another 3% by the government (through the interest subvention scheme) and the remaining 3% by the loan customers. If this kind of a plan is implemented, the banks will not incur huge losses. Collectively, the Indian economy will start to come out from the crisis caused due to the Covid-19 outbreak."
Echoing a similar thought, the Coimbatore Wet Grinder and Accessories Manufacturers Association(COWMA) Cluster President, Sastha M Raja said, "The EMI moratorium announcement made by the RBI will not be helpful to the customers, instead it will add burden on loan repayments.
For example if an industrialist has availed a bank loan of Rs.1 crore with the repayment period of 60 months and if 10% interest is levied, each year Rs.10 lakhs will have to be paid as interest of which Rs.5 lakhs will not be paid for six months due to the moratorium announcement made by RBI, but on the other side the principal will be increased from Rs.1 crore to Rs.1 crore and 5 lakhs.
Loan burden also will be increased to Rs.15 lakhs. After the moratorium period, interest will be calculated for Rs.15 lakhs. Earlier the customer would have paid Rs.1,66,666 EMI. However, after the moratorium period, he or she will have to pay Rs.1,84,000. The present industrial climate is not good and will be so for months.
Hence it is suggested that all the bank interest for loans should be completely waived off for the six-month moratorium period to all those who have availed bank loans up to Rs.1 crore (micro and small sectors and all those who are employed and have availed various loans such for housing, two wheelers, four wheelers, etc).
If this suggestion is taken up, those who are currently struggling with the financial crisis will recover from it. Only then this moratorium announcement can be made welcome."