The repercussions of the deadly coronavirus are far-reaching and already evident in the Indian economy, which had already slowed down before lockdowns became a part of daily life.
On 27 March, the RBI announced a string of fiscal measures to cushion the economic impact of COVID-19 including one that is aimed at easing the liquidity problems of borrowers.
Here’s everything you need to know about the RBI’s moratorium on EMIs and what it means for borrowers.
What does the moratorium entail?
The RBI’s ruling allows banks, lending institutions, and NBFCs to give a moratorium of three months to all borrowers. It is applicable for all upcoming term loan payments due between 1 March and 31 May. Credit card payments will also be eligible for the moratorium for the same period.
What do the term loans include?
They cover all retail loans including home loans as well as agricultural loans and crop loans.
Will interest be waived for the duration?
Banks have reiterated that the moratorium is only a deferment and not a waiver.
That means, you can push your payments by a few weeks and you will not be penalised for the same. The moratorium does not include any concessions either, which means interest will continue to be charged on the outstanding amounts.
Will it affect credit history?
No, it will not.
Will there be an extension if the payment for March is already made?
No. If you have already paid your dues for March, then you will be eligible only for the remaining two months.
Is the moratorium mandatory?
As of now, the implementation of the moratorium has been left to the discretion of each bank. While some banks might offer an ‘opt-in’ others might automatically make you eligible.
Should you opt for the moratorium?
The moratorium is most helpful for workers who are dependent on irregular cash flows as it will enable them to have more money in hand during these tough times. It might also help solve cash crunches for salaried employees who are facing pay cuts, delayed payments, or are being laid off in the current situation.
Many industry experts suggest that those who are able to continue paying EMIs should do so as accruing a large amount of interest at the end of three months might be daunting. Hence, if your bank gives you a choice and if you can afford it, then it would be wise to opt-out.