Income stream will not resume due to the continuation of nationwide lockdown, the sources said, adding that so many entities and individuals will be unable to service their debt in this circumstances at the end of the present moratorium period ending on May 31.
So, extension of moratorium by another three months would be a practical approach from the regulator, a senior public sector bank official said.
It will help both borrowers and banks in these difficult times, the official added.
The Reserve Bank of India (RBI) had on March 27 allowed banks and financial institutions to offer a moratorium of three months on payment of instalments of all term loans outstanding as on March 1 to help mitigate hardship faced by borrowers.
"All commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all -India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) ("lending institutions") are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020," the RBI had said.
Accordingly, it had said, the repayment schedule and all subsequent due dates, as also the tenor for such loans, may be shifted across the board by three months.
As a result of this moratorium, individuals' EMI repayments of loans taken were not deducted from their bank accounts, providing much needed liquidity.
The loan EMI payments will restart only once the moratorium time period of 3 months expires.
RBI Governor Shaktikanta Das on Saturday held a meeting of held meeting with public and private sector banks where the issue of loan moratorium was also reviewed.
Credit flows to different sectors of the economy, including liquidity to non-banking financial companies, microfinance institutions, housing finance companies, mutual funds, etc, and post lockdown credit flows including provision of working capital, with special focus on credit flows to MSMEs were also deliberated.
The Supreme Court earlier this week directed the RBI to ensure that its March 27 guidelines directing lending institutions to allow a three-month moratorium to all borrowers is implemented in letter and spirit.