In a relief for people hit by demonetization, the RBI has allowed borrowers of housing, farm, car and other loans below Rs 1 crore to get a grace period of over 90 days to repay their loans. The RBI had earlier allowed a relaxation of just 60 days and that has now been extended to 90 days. The borrowers get a 90 day grace period from being labeled as a Non Performing Asset (NPA).
This will be applicable for all payments that had to be made between November 1st and December 31st. Demonetization had resulted in a many businesses grinding to a halt as 86% of the money supply in the system dried up as Rs 500 and Rs 1,000 notes got demonetized. Due to the long queues at banks, many of a bank’s normal functions got affected and basic things like cheque clearance got delayed.
This resulted in many people not receiving funds from their creditors. Also, many businessmen were not able to operate as there was a limit on cash withdrawal. This resulted in the inability of many borrowers to repay their loans and banks feared that their NPAs would swell up by a huge margin.
The RBI has also come out with a special dispensation for agricultural farm loan waivers early this week.