While taking the loan, Borrower may have assumed that s/he will have uninterrupted employment throughout the entire tenor of the loan but that’s not a relevant factor in the loan agreement. End of the day, Borrower is obliged to make full loan repayments (EMIs) whether they have a job or not.

In my experience, I totally refuse to believe that “most of us have no jobs now because of lockdown” but, for the sake of argument and to go forward with this answer, let me take the specific case of a Borrower who does not have a job because of lockdown. Assuming that their Lender Bank has extended the RBI-permitted 3 month moratorium on loan repayments, this Borrower need not pay any EMIs during this period. So immediate problem is solved.

However, that’s sorta kicking the can down the road.

Moratorium is not waiver. You can find my detailed thoughts on the moratorium in my answer Ketharaman Swaminathan’s answer to What is the use of the 3-month moratorium announced by RBI with regards to Covid-19, as taking that option looks like we have to pay thrice the EMI back later?.

Interest accumulates during the 3 months’ moratorium period. While the loan tenor has increased by 3 months, thereby keeping the principal component of EMI unchanged, accumulated interest during the said 3 months will add to the EMI payable in the remaining loan tenor.

Some Borrowers may be able to shrug off the higher EMI load and life will go on.

Some Borrowers may not be able to do so.

In the latter case, I see two options:

  1. Borrower defaults on the loan and faces foreclosure
  2. Borrower sells off some personal assets or raises money in some other way in order to ensure non-default of the loan and escapes foreclosure.

Under no circumstances do I advocate any lenience on repayment.

While the pandemic was a Black Swan event for the Borrower and strained his or her finances, it was equally well a Black Swan event for the Lender, Government and everybody else and strained their respective finances too.

Ergo, I see no case for any regulatory intervention to favor any one party unilaterally.