A friend from banking industry shared this story. One of his relatives built up a fleet of trucks in last year or so. He started with one truck with borrowed money from bank and went on to buy 8 trucks, all on loan from bank. Trucks were doing good before covid and paying for self. The owner was able to pay monthly EMIs on time for the trucks.
The covid related lockdown led to trucks sitting idle and no income. The owner is now more than 6 months late on EMIs. Moratorium provided by government was of no help, it was highly in favor of lenders.
Now when the bank calls this guy for EMI, he straight away offers them to confiscate the trucks as he cannot pay past EMIs. The banker would then tone down and give him more time to pay EMI. This is going on for few months.
In normal circumstances bank would confiscate the property but the situation is so bad right now, bank has no option but to give more time to borrower. The so called bad loans are so many, banks cannot confiscate all properties.
Property confiscation is a costly process, for example if bank confiscates the trucks in this case, it has to hire people to do same and bank has to pay considerable amount for the time truck spends in parking lot until it is sold or auctioned off again. Given the current circumstances it is in the best interest of bank to give more time to borrower for loan repayment.
My friend informed that banks have no intentions of property confiscations, they are only after interest they earn from loans, that is their bread and butter.
I wonder how this deadlock between borrowers and lenders will break. Government cannot help much here. Borrowers and lenders will have to work it out.
I think lenders should let go interest for at least a year. This will help businesses to continue without any stress and this in turn would open probability of future income for banks. If banks force businesses to close that would be lose-lose situation for all.