Loan Moratorium is legal permission given for the deferment of a loan.
This Moratorium can be given at two stages:-
1) At the time of sanction of loan, considering the project implementation period.
2) when the borrower approaches the bank for deferring the payment due to financial difficulties, which may have arisen on account of reasons which are beyond his control.
Moratorium given as per item (1) does not amount to restructure since it is considered at the beginning of the loan itself by factoring cash generation out of the project.
However, if the loan is provided by Moratorium during the repayment period, then it will be flagged as restructuring and will attract NPA classification norms.
At present several borrowers are facing financial difficulty due to covid impact, hence RBI came out with Resolution Framework 2.0 to provide relief to Individuals, Small Businesses, and also to MSME.
This resolution framework 2.0 provides for Moratorium, Loan tenure extension for those who have not availed relief under Framework 1.0. It also provides relief to those who already availed under Framework 1.0 with some condition.