RBI Permits Banks, Lenders to Allow 3-Month Moratorium on EMI – Check Important Points

In a move aimed at mitigating the impact of the coronavirus outbreak on businesses and employees in India, the Reserve Bank of India on Friday asked all banks and other lending institutions to allow a three-month moratorium on all kinds of loans. The RBI also said that moratorium on term loans and deferment of interest payment would not result in asset classification downgrade.

With the RBI giving a green signal to defer loan repayment for three months, the ball is in the banks’ court to pass on the benefit to people, many of whom have been affected to due job loss and salary cuts in wake of COVID-19 crisis.

Important Points:

Please don’t take the three-month-EMI holiday as a given. It depends on the bank/NBFC you have borrowed money from. The RBI statement clearly says that.

All commercial banks, co-operative banks, all-India Financial Institutions, and NBFCs are being permitted to allow a moratorium of three months on payment of installments in respect of all term loans outstanding as on March 1, 2020.

The statement clearly says “are being permitted to allow a moratorium of three months on payment of installments”. This is a key phrase that almost everyone seems to have missed out on.

It depends on the state of the bank/NBFC and if it is in a position to do so… Repayment of loans is important for banks to redeem maturing deposits. Banks that have enough deposits which haven’t been lent or are over-invested in govt securities should be able to do it.

Via: Kaul Vivek

Here are questions on RBI decision related to personal loan / EMI/ Credit Card bills answered.

Q: My EMI is due soon. Will the payment not be deducted from my account?

A: The RBI has only allowed banks to allow a moratorium. Individual banks will have to allow suspension of EMIs. The borrower will have to request the bank and show that his or her income has been impacted by the coronavirus disruption. This means that unless you have specific approval from your bank, your EMIs will still be deducted from your account.

Q. Is this a waiver of EMIs or a deferment of EMIs?

A. This is not a waiver, but a deferment. You will have to pay the EMIs at a later as decided by the bank. The RBI has told banks to have board-approved policies in place on moratorium/deferment.

Q: Does the moratorium cover both principal and interest?

A: Yes. It does. If announced by your bank, you can forego payment of your entire EMI, including principal and interest.

Q. What kind of loans does the moratorium cover?

A. The RBI policy statement explicitly mentions term loans, which include home loans, personal loans, education loans, auto and any loans which have a fixed tenure. It also includes consumer durable loans, such as EMIs on mobiles, fridge, TV etc

Q: Does the moratorium cover credit card payments?

A: Since credit cards are defined as revolving credit and not term loans, they are not covered under the moratorium.

Q: I have taken a business loan. Can I not pay my EMI?

A: The moratorium has been allowed on retail loans.

 

Still, there is a lot confusion we will update more information on this page soon. Stay tuned!

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