The temporary suspension of an activity or law until consideration is given to warrant lifting the suspension in the future is a moratorium as if the issues leading to the adjournment have been resolved. A moratorium can be imposed by the government, regulators, or businesses.
Moratoriums are often imposed in response to temporary financial difficulties. For example, a business that has exceeded its budget may hold off on new recruitment until the start of its next fiscal year. In legal proceedings, a moratorium may be imposed on an activity such as the debt recovery process during bankruptcy proceedings.
The moratorium contains a temporary exemption from enforcement of collection of interest on loans, taxes under assessment proceedings, and imposition of fines on delayed payments. The moratorium, in general, temporarily removes financial difficulties. Legal proceedings can also be placed under adjournment to suspend all legal proceedings temporarily.
In the recent crisis like Coronavirus or COVID-19 spread in India, all the banks have put a moratorium on collecting loan instalments and payment of interest. Bank customers can pay installments and interest later during the moratorium period.
The Government of India has suspended the collection and recovery proceedings under various tax laws during the moratorium period. Similarly, the statutory due dates for compliance under corporate law and indirect and direct tax laws have been deferred by three months. Different countries have similarly imposed restrictions on tax and regulatory compliance, tax collection, and others.
A moratorium can also be put in place by a business organization. During a financial downturn, businesses may change their policies to save cash. For example, in a financially stressful period, the organization may prohibit hiring people or paying bonuses. The duration of the moratorium can be six months or one year.
The buzz around Moratorium in India
Non-Banking Financial Companies (NBFCs) have introduced instant personal loan NBFC apps for the convenience of the borrowers. These apps have made the entire financial services sector easily accessible and convenient.
Around 10,000 NBFCs in India are registered with the RBI and follow their guidelines. Let’s look at some of the NBFCs that are the best instant loan apps.
- TrueBalance: It offers services like personal loans, prepaid mobile recharge, DTH, and mobile or utility payments.
- Fullerton: India provides services like personal loans, auto loans, and many other loans.
- Early Salary: It provides instant loans to individuals to meet regular expenses.
- Bajaj Finserv: It provides home and business loans to borrowers.
These are some of the best personal loan NBFCs online apps. After doing proper research on these apps, apply for a loan, and make sure you understand all the terms and conditions!
Your interest payments will be higher if you have taken a personal loan at a higher interest rate earlier and have decided to forgo EMI by availing of the moratorium. Additional personal loan rates increase your financial liability in the future. Hence, it would not be prudent to hold off the EMI payment for the next 3 months.
Those who had taken personal loans with low CIBIL scores or credit card defaulters (unfortunately unable to pay the dues). Try to increase your credit score through.
- Prepaid credit cards are also available in major banks like ICICI, HDFC and other nationalized banks. For this card, you need to deposit some minimum amount as per the bank so that you get the credit card limit of 80 to 85% for that amount so that you can use the amount and pay properly. Where the bank updates this tracking to CIBIL. So 15 months down the line, you have a great chance of applying for another loan when you need it.
- If you currently have any ongoing EMIs that you have purchased, like a Bajaj Finance EMI Card or anything else, pay right on time without any defaults that improve a part of the credit position again.
- After those 2 points, 15 to 18 months, you need to check good financial counselling to proceed with your loan request and get successful approval.
A moratorium is typically a response to a crisis that disrupts normal business activities or the normal routine of the public. Moratorium provides financial relief; and eases liquidity pressure on homes, businesses, and others affected by the crisis.
Similarly, the government can also reduce its discretionary expenditure or redirect expenditure to provide financial or medical relief. A moratorium is lifted when the public or businesses resume their normal routine.