The Insurance Regulatory and Development Authority of India (IRDAI) has permitted insurers to grant a moratorium of three months on repayment of term loans sanctioned by them.
The decision follows representations from industry associations to the regulator, seeking moratorium on repayment of term loans sanctioned by insurers in the context of COVID-19 outbreak.
Considering the cash flow problems faced by the borrowers and in line with the recent directions of the RBI on moratorium on term loans, insurers are permitted to grant a moratorium of three months towards payment of instalments falling due between March 1 and May 31, IRDAI said.
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. Interest shall continue to accrue on the outstanding portion of the term loans during such moratorium period, HOD – Investments of IRDAI S.N. Jayasimhan said in a circular to all insurers.
Directing insurers to frame board-approved policies to extend the moratorium to all eligible borrowers, IRDAI said the asset classification of term loans that are granted the relief should be determined on the basis of revised due dates and revised repayment schedule. The rescheduling of payments, including interest, will not qualify as a default for the purpose of reporting of non-performing assets (NPAs).
Concurrent auditors in their reports for the quarter ending June 2020 shall confirm that the insurers had complied with the Board Approved policy in granting moratorium, IRDAI said.