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IRDAI allows insurers to give moratorium on term loan repayment due to coronavirus impact

In respect of term loans, insurers are permitted to grant a moratorium of three months towards payment of instalments falling due between 1st March 2020 and 31st May 2020.

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Last Updated: Apr 08, 2020, 05.26 PM IST
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Interest shall continue to accrue on the outstanding portion of the term loans during such moratorium period.
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Considering the cash flow problems faced by many due to the coronavirus lockdown, the Insurance Regulatory and Development Authority of India (IRDAI) has asked insurers to offer a moratorium to borrowers on repayment of all term loans sanctioned by them.

According to an IRDAI circular dated April 7, "The Authority has received representations from industry associations seeking moratorium on repayment of term loans sanctioned by the Insurers, in the context of outbreak of Covid-19. RBI has issued directions dated 27th March, 2020, providing certain moratorium to the borrowers of Term Loans."

Keeping in line with RBI's directions, the following instructions on providing moratorium on repayment of term loans have been issued by IRDAI:

1. In respect of term loans, insurers are permitted to grant a moratorium of three months towards payment of instalments falling due between 1st March, 2020 and 31st May, 2020. The repayment schedule for such loans and also the residual tenor, will be shifted across the board by three months subsequent to the moratorium period.

2. Interest shall continue to accrue on the outstanding portion of the term loans during such moratorium period, as per the IRDAI release.

3. The asset classification of term loans which are granted relief as per point no.(a) above shall be determined on the basis of revised due dates and revised repayment schedule.

4. The rescheduling of payments, including interest, will not qualify as a default for the purpose of reporting of NPAs.

5. Insurers shall frame Board approved policies to extend above mentioned reliefs to all eligible borrowers.

6. Concurrent Auditors in their reports for the quarter ending June, 2020 shall confirm that the insurers have complied with the Board Approved policy in granting moratorium.

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