In case of public bank when we are not paying anything during moratarium is the interest portion compounded every month.
In the case of public banks, when you are not required to make payments during a moratorium period, the treatment of interest may vary depending on the bank’s policies and the terms agreed upon. However, in general, interest accrual during a moratorium is typically not compounded on a monthly basis.
During a moratorium, the bank may temporarily suspend the requirement for you to make principal and interest payments on your loan. This means that you are not obligated to make regular payments during this period. However, it’s important to note that interest may still accrue on the outstanding loan balance.
The specific calculation of interest during a moratorium can vary, but it is typically based on the agreed interest rate and the outstanding loan balance. The interest may be calculated on a simple interest basis, meaning it is not compounded monthly. Simple interest is calculated based on the original principal amount, the interest rate, and the time period.
For example, if you have a loan with a moratorium period of three months and a simple interest rate of 5%, the interest accrued during the moratorium would be calculated based on the outstanding loan balance over those three months. The interest accrued during the moratorium is typically added to the loan balance, and once the moratorium ends, your future payments would be adjusted accordingly.
It’s important to review the terms and conditions provided by your specific bank or financial institution regarding the treatment of interest during a moratorium period. The terms may vary, and it’s always advisable to seek clarification from your bank to understand how the interest will be calculated and accrued during the moratorium.
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