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What is moratorium in banking?

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0 2021-06-10T12:40:56+00:00
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What is moratorium in banking Moratorium is a temporary suspension for repayment of loan and credit card installments. In India, under moratorium Reserve Bank of India offers the extension for a decided period (3 months to 6 months usually) to make the repayment of loans and credit card installment. It is also known as the EMI holiday. When  moratorium period in bank is applicable?
  • When a nation faces any natural calamity like earthquake, drought, or any other outbreak of a disease.
  • Whenever normal life is disrupted and citizens of the country are facing financial hardships.
  • This period is over when things get back to normal.
  • Live example of moratorium is covid 19 pandemic and on 27 march 2020 RBI declared a moratorium period in the country for a period of three months which got extended to another three months later.
What is moratorium period for bank?  The moratorium can be applicable for education loans. The reason to provide a moratorium feature is that a student might find difficulty in getting a job just after the completion of education. The moratorium period ends for students just after the student starts earning.  Generally, there is a time lag between completing studies and getting a job. This is the reason a moratorium is provided for student loans as well. This is a gist of what is moratorium in banking.

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