New Delhi: Reserve Bank of India 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. Also Read - 'India Was on Verge of Defeating COVID-19 But...' NITI Aayog Official Says Second Wave Hurting Economy
In a circular to all banks and non-banking financial companies, the RBI said,”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 are permitted to grant a moratorium of three months on payment of all installments falling due between March 1, 2020 and May 31, 2020.” Also Read - Are You Saving Money By Putting in Savings Account? Actually NOT
What is moratorium? Also Read - Bank Holiday Alert: Banks To Remain Closed For 4 Days From Today In These Cities | Full List Here
A time during the loan term when the borrower is not required to make any repayment is called a moratorium period. Usually, the repayment begins after the loan is disbursed and the payments have to be made each month.
But the central bank has a one-time exception as it joined the government effort to rescue a slowing economy that has now got caught in coronavirus whirlwind.
The decision has come as a major relief to the retail loan borrowers including farmers whose daily work and farm activities have stopped due to the 21-day lockdown leaving them with lower or no income.
What will happen if a person’s EMI is due? Will the EMI be deducted from his/her account?
Well, only banks are allowed to grant a moratorium of three months to borrowers. This means that a person needs to take specific approval from his/her lender to avail the moratorium period. The loan EMI payments will restart once the moratorium time period of 3 months expires.
Will non payment changes an individual’s credit score?
No. It won’t. The RBI has stated that the moratorium will not result in asset classification downgrade and will have no adverse impact on the credit history of the borrowers.
Which banks can offer this deferment to their customers?
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 and micro-finance institutions) included.
Both principal and interest come under moratorium?
Yes. If permitted by a bank, an individual will be exempted from payment of their entire EMI, including payment and interest for three months.
What kind of loans does the moratorium cover?
Term loans, which includes home loans, personal loans, education loans, auto and any loans which have a fixed tenure. Besides, it also include consumer durable loans, such as EMIs on mobiles, fridge, TV etc.
Does the moratorium cover credit card payments?
Yes, a clarification issued by the RBI stated that credit card dues will also be covered under moratorium which means all payment against money borrowed using a credit card will also not be required to be paid for next three months.