Coronavirus : Moratorium on EMIs for 3 months

Coronavirus : Moratorium on EMIs for 3 months

Coronavirus Crisis: RBI Guv Briefs Media

The RBI today announced a three-month moratorium on payment of EMIs on all term loans that were outstanding on March 1. The RBI made it clear that this will not affect the credit history of people and neither will it let to asset classification. The announcement in this regard was made by RBI Governor Shaktikanta Das.

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

In a move planned for moderating the effect of the coronavirus episode on organizations and workers in India, the Reserve Bank of India on Friday asked all banks and other loaning foundations to permit a three-month ban on a wide range of credits. The RBI additionally said that ban on term credits and suspension of intrigue installment would not bring about resource grouping downsize. 

With the RBI giving a green sign to concede credit reimbursement for a quarter of a year, the ball is in the banks' court to give the advantage to individuals, a large number of whom have been influenced to due employment misfortune and pay cuts in wake of COVID-19 emergency. 

The summit bank likewise said all loaning organizations and banks had been permitted to concede enthusiasm on working capital reimbursements by a quarter of a year. The RBI likewise permitted banks to rethink the working capital cycle and said that they won't be treated as non-performing resources. 

Shaktikanta Das, in setting of the ongoing YES Bank emergency, said the Indian Banking framework was "free from any potential harm". He said bank contributors of business banks, including private ones, ought not stress over the security of their cash. "Try not to turn to the frenzy withdrawal of stores from private banks, your cash is sheltered," he included. 

RBI's Monetary Policy Committee, in its gathering held between March 24-27, chose to cut repo rate by 75 premise focuses to 4.4 percent, while the converse repo rate has been diminished by 90 premise focuses. Calling the present occasions "phenomenal conditions", the RBI Governor said the MPC decided in favor of a sizeable decrease in repo rate to resuscitate development, alleviate COVID-19 effect. 

The choice comes a day after the administration reported Rs 1.7 lakh crore worth alleviation bundle for needy individuals, representatives and ladies to adapt to the COVID-19 emergency. In her second location to the media inside seven days, Sitharaman reported Rs 50 lakh clinical protection spread per individual for social insurance laborers, sanitation laborers, paramedics, specialists and attendants who are presenting themselves to the infection. 

The present choices taken by the RBI would give a major help to the people, organizations confronting a major monetary test in the wake of the 21-day lockdown reported by the administration.

FAQ on RBI Moratorium

What is Moratorium?

Moratorium Period is a time period during the loan term, generally starting from the date of disbursement of loan, during which the borrower is not required to make any repayment or is required to pay only the interest portion. In other words, the borrower gets principal holiday and may or may not get interest holiday during moratorium period i.e. till the time full EMI starts.

• Principal Holiday – During moratorium period, the borrower is not required to pay back principal amount. Hence, it is called as principal holiday.
• Interest Holiday – The borrower can generally choose whether he wants to pay interest during the moratorium period or not. Different banks have different products. Some products ask you to necessarily pay interest during moratorium while others don’t. If you are not required to pay interest during moratorium period, then it is called interest holiday.

Whether interest to be capitalized during moratorium period?

Capitalization of Interest – In case, you choose not to pay interest during moratorium period, your interest will be compounded monthly/ quarterly and total interest amount accumulated during moratorium will be added to the principal. Hence,your EMI will increase if you choose not to pay interest during moratorium period.
But, when RBI/Bank it self impose Moratorium, then above mention may not applicable.