New Delhi: At this time of coronavirus lockdown, when most of the manufacturing companies have shut down their units, the Reserve Bank of India on March 27 made a big announcement about three-month moratorium on EMIs of all term loans due during March 1 to May 31. Also Read - RBI Announces Second Targeted Long Term Repo Operation, Extends Fixed Rate Reverse Repo
Addressing a press conference, RBI Governor Shaktikanta Das said that the repayment schedule for all those loans would be shifted by three months after the moratorium. Also Read - What is RBI's 3-Month Moratorium? Will EMI be Deducted From Your Account? Here Are Your Answers
The RBI in this regard earned praise from all quarters for the decision of putting on hold EMI payments on all term loans for three months as it joined the Central government’s effort to combat coronavirus. Also Read - RBI's Covid-19 Package: Here's How You Will be Benefitted | Explained
As per the RBI announcement, borrowers are getting 3 months more time to completely repay the loan amount, but some, however, don’t want to postpone their EMIs because they say they can manage to pay the EMIs even during coronavirus lockdown. In this case, some are confused whether they should postpone their EMI or should pay it right away.
As per an expert’s advice, if they choose to defer their EMI, then their loan tenure will be extended by 3 months. Moreover, that will attract interest also. And, if they have enough money with them, it is better to pay now and don’t wait for three months.
With regards to 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) will grant a moratorium of three months on payment of all instalments falling due between March 1, 2020 and May 31, 2020.
On the other hand, the repayment schedule for such loans will be shifted across the board by three months after the moratorium period is over.
Looking into details, the interest rate will continue to accumulate on the outstanding portion of the term loans during the moratorium period.
Apart from this announcement, the RBI had also cut interest rate by steepest in more than 11 years. Also, the central bank had cut repo to 4.4 per cent, the lowest in at least 15 years. The central bank reduced the cash reserve ratio maintained by the banks for the first time in over seven years. The CRR for all banks was cut by 100 basis points to release Rs 1.37 lakh crore across banking system. The reverse repo rate was cut by 90 bps to 4 per cent, creating an asymmetrical corridor.
The RBI also announced some liquidity measures which include auction of targeted long-term repo operation of 3 year tenor for total amount of Rs 1 lakh crore at floating rate and accommodation under Marginal Standing Facility to be increased from 2 per cent to 3 per cent of Statutory Liquidity Ratio (SLR) with immediate effect till June 30.
These measures from the RBI came just a day after the Central government unveiled a Rs 1.7 lakh crore package of free foodgrains and cash doles to the poor to deal with the economic impact of the lockdown.