Why Kerala govt moratorium on loan recovery remains on paper

Kozhikode: Cooperative and commercial banks are going ahead with attachment of property of loan defaulters even though the Kerala Government had announced a moratorium till December 31.

Most of the poor loanees are not getting the benefit as the cooperative banks and commercial banks took a tough stand that they would not implement moratorium solely on the basis of the order issued by the Revenue Department.

The State Cabinet decided to enforce a moratorium on bank loans by taking into account the acute COVID-19 crisis and the losses suffered by the farmers in the floods. But the cooperative and commercial banks are of the view that such an order is not applicable to them.

The State Government had earlier decided to approach the Reserve Bank of India (RBI) and the State-Level Bankers' Committee for extending the moratorium period.

But the commercial banks pointed out that no directive on moratorium has come from the RBI. The State-Level Bankers' Committee alone cannot take a decision on this matter. Moreover, both the Kerala Bank and Malappuram District Cooperative Bank need the permission of the RBI to implement the moratorium.

Though the Revenue Department in its order mentioned about the cooperative banks, it is still doubtful whether the order can be made applicable to grant moratorium on loans taken from primary agricultural credit societies and service cooperative banks.

It is pointed out that moratorium can be enforced by the service cooperative banks only if the Registrar of Cooperative Societies issues a separate order.