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Tuesday, April 23 2024
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Covid: Both banks and borrowers’ hands tied, aggrieved look towards govt help

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With sources of income dwindling and lay-offs in full swing amidst the whirlwind pandemic, borrowers are finding it particularly hard to pay bank loan instalments. The pandemic has hindered earning of income for people across several sectors.

The agricultural sector, in particular, has been severely affected. The state government has allowed farmers a period of three months from April 1 – June 30th wherein the loan payments have been deferred and the interest is being covered by the government.

“In Dakshina Kannada, the farmers who depended on arecanut sales have been stopped in their tracks as transportation of arecanut has slowed down considerably. The farmers cannot repay their loans or even renew them as they do not have the principal amount,” said Manohar Shetty, State Secretary of Karnataka Rajya Raita Sangha Hasiru Sene.

“While the government has given time till June, I do not believe it is sufficient. My opinion is that considering the gravity of the situation, the government should extend the instalment period for at least 6 months or preferably till March 2022 while declaring a period of holiday till then,” said Manohar. He further added, “while the government has provided sanctions of Rs 7500 to paddy farmers, there are several restrictions imposed on it which makes it inaccessible to some.”

The Reserve Bank of India (RBI) has reopened a restructuring scheme in order to alleviate the burden on borrowers and small businesses. Only those customers can avail of the loan restructure whose account is standard and not degraded to the non-performing category as of 31 March 2021. Account-holders who availed of previous restructuring schemes are not eligible.

A source from Karnataka Bank said that the bank is complying with all the governmental and RBI guidelines to assist the borrowers and help them come out of the difficult situation that the pandemic has created. “There is no pressure on borrowers from banks to pay instalments and we are sincerely implementing RBI guidelines in the course of recovery. We are offering a moratorium to all our eligible customers. We have individually contacted customers, offering loan sanctions when requested. Approximately Rs 2500 – 3500 crore worth of loans has been exposed to GECL 1, 2 and 3. We are currently in the process of implementing restructure 2.0, i.e. the resolution of COVID – 19 related stress for individuals and small businesses. This is as per the RBI circular on 5 May 2021.”

“Banks are following instructions as per the RBI guidelines. We are providing customers with the option of restructuring their loans, however, that increases the rate of interest by 0.35 – 0.5%. Bank of Baroda is offering a moratorium and restructuring of loans with the consent of the customer,” said a senior branch manager at Bank of Baroda.

Deputy Registrar of Dakshina Kannada and Udupi in charge of Cooperative Societies, Praveen B Kumar said that numerous grievances have been received since the lockdown, thus genuine appeals have been put forth to the relevant institutions. “The RBI has given permission to restructure the loans. While this is an option, it is better used with caution and only if necessary since the rate of interest goes up. In these hard times, we are trying to prevent the seizing of vehicles, jewellery and such. We have not received any complaints regarding the seizing of collaterals.”

While the banks are bound by RBI guidelines, borrowers have their hands tied. It is indeed a complex situation.

Image Courtesy rupixen by pixabay

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