An opportunity in Covid-19 crisis: Revisit all loan repayment contracts

It is a chance for stakeholders in the banking sector to revisit contractual obligations, say experts

The prospect of wide-scale defaults in banking-related contractual obligations on account of the pandemic has stirred lenders into action. The Indian Banks’ Association (IBA) plans to recommend to the Reserve Bank of India and the government a host of relaxations in repayment of loans and relief in classifying accounts as non-performing assets.

What makes any banking-related defaults complicated, both for lender and borrower, is that banking laws and regulations are typically centred on security cover, and do not deal with pandemic situations, say experts.  

“Most loan-related contractual agreements do not have force majeure clause that could be triggered to terminate the loan