With the slowdown in economic activity witnessed across the globe as a result of the coronavirus outbreak, Indian citizens took to Twitter and other social media platforms pleading to the government to impose a temporary pause on loan repayments and EMIs for the next three months as a part of the economic relief package.
Plea to govt seeking temporary relief on loan repayments
The coronavirus outbreak has disrupted business workings to impact profits, with many employers considering layoffs, delayed payment of salaries in the next month and some asking staffers to go on unpaid leaves. The crisis situation has made it extremely difficult for employees of smaller firms, businesses, and corporates to manage loan repayments on time. To be able to tide over the current situation, citizens took to Twitter pleading to the government seeking temporary relief on loan and credit card repayments until there is further clarity on the situation.
According to a report in Deccan Chronicle, earlier this week on March 24, the auto and taxi drivers have requested the government to issue a moratorium on interest payment on vehicle loans. Also two leading app-based cab services, Ola and Uber have suspended services owing to the lockdown, which will result in many drivers defaulting on loan repayments now.
Taking note of the current situation, BJP leader Kirit Somaiya in a letter to the RBI governor Shaktikanta Das pleaded to declare a three-month moratorium for EMIs and loan repayment, as monthly income of businesses is affected owing to the nationwide lockdown.
Debashish Panda, secretary for Department of Financial Services in a letter to the RBI suggested a moratorium of a few months on loan repayments and a relaxation in the classification of non-performing assets (NPAs), as businesses may not be in a position to service the EMIs on account of salary cuts and unwarranted layoffs. If businesses are unable to service loans during the lockdown period, they fear adverse action by the RBI and impact on their credit profile ratings. Industry lobbying groups, CII and FICCI support a three-month moratorium on loans to be declared by the government as well.
Awaiting the final call by the RBI and govt
A Reuters report suggested a bailout package of Rs 1.5 lakh crore or $19.6 billion should be announced by the government to provide economic relief for the common man. However, we need to wait and watch if the RBI, finance ministry and the government join forces and consider the suggestions made in favour of businesses, individuals and MSMEs, to take better control of the crisis by offering temporary relief on EMIs and loan repayments in its economic relief package, to be announced soon.
No final decision or announcement has been made yet by the Government, if a pause will be declared for the next three-months on EMIs, credit card payments, and loans with the coronavirus pandemic crippling the loan repayment capacity of individuals and businesses across the globe. A banker said on the condition of anonymity that the RBI is actively considering delayed EMI (equated monthly installment) payment by customers.
In a recent economic relief announcement by the Finance Minister Nirmala Sitharaman, the loan default threshold on Insolvency and Bankruptcy Code (IBC) has been raised from the current Rs 1 lakh to Rs 1 crore now.
Amazon and eBay pause loan repayment for sellers
Meanwhile, the largest online ecommerce platform Amazon has paused repayment of loans under the Amazon Lending programme to its merchants, on account of declining sales because of the coronavirus pandemic, beginning March 26 until April 30. This move by the world's largest online retail platform is intended to provide relief to sellers with no interest on loans accrued during the period.
Under the programme, Amazon has offered loans between $1,000 and $750,000 to merchants seeking capital to expand their product lines, advertise on the platform and acquire more inventory. The loan repayments will begin on May 1, 2020 and the sellers will have to make the same number of remaining payments, once the state of normalcy in business operations resumes. The interest rate on loans provided for a period anywhere between three months to year by Amazon range from 6% to 19.9%.
Another online marketplace, eBay Inc said it will be deferring selling fees for most merchants for the next one month (30 days).