RBI gives 3-month break on term loan EMIs
NEW DELHI : Amid the Coronavirus outbreak and its impact on the livelihood of millions of individuals – both salaried and self-employed – the Reserve Bank of India’s announcement today has given a big relief to the term loan borrowers.
The RBI has permitted a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020. This means, no EMI would be deducted from the account of anyone who has a loan outstanding. All commercial banks, including housing finance companies, have been allowed to give a moratorium of 3 months on the monthly installments in respect of all term loans outstanding as on March 1, 2020.
“The 3-month loan moratorium will come as a big relief for borrowers who might have been struggling with their repayments in these times of extraordinary economic challenges and uncertain financial future,” says Adhil Shetty, CEO, BankBazaar.com.
RBI Governor Shaktikanta Das on Friday announced a three month moratorium on EMIs of all term loans due during March 1 to May 31 and said that the repayment schedule for all those loans would be shifted by three months after the moratorium.
In respect of all term loans (including agricultural term loans, retail and crop loans), all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies) (“lending institutions”) are permitted to grant a moratorium of three months on payment of all instalments falling due between March 1, 2020 and May 31, 2020.
RBI permitted commercial banks and other financial lenders to allow borrowers to delay their loan repayments by a period of three months. The move by the regulator complemented the government’s announcement of a Rs 1.7 lakh-crore fiscal package the previous day to help the poor survive the 21-day countrywide lockdown.
The instalments will include dues related to principal/interest, equated monthly instalments (EMIs), and credit cards, the RBI said in a notification later. The RBI’s directive enables banks and other lenders to let their customers defer their loan repayments by a period of three months. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period.
So if you have a term loan, which is a monetary loan to be serviced at regular intervals – say monthly, today’s RBI directive will allow your bank to let you pay the EMIs for next three months at a later time.
And this will be applicable, according to the RBI, to all term loan outstandings as on March 1, 2020. In other words, if you had any active loan on March 1, for which at least one EMI is due, you will now get three months to make that payment.
The three-month moratorium means that no EMI would be deducted from the account of any loan borrower for the next three months, and this will not affect the credit score of the borrower, say analysts. This pause on interest payments will be applicable to corporate loans, home loans, car loans and personal loans.
It will especially come as a huge relief for the self-employed EMI payers as their income has taken a hit in wake of the lockdown.
Among other measures to support the financial markets and ensure sufficient liquidity in the system.
The RBI also cut the repo rate by 75 basis points – the biggest downward reduction since January 2009, and the reverse repo rate by 90 basis points, and eased the rule on the amount of cash commercial banks have to necessarily keep parked with the RBI.
(With Agency Inputs ).