As we all know, the Reserve Bank of India (RBI) allowed all financial institutions to grant a three-month moratorium on all term loans due to the outbreak of COVID-19 and the subsequent lockdown.

The Reserve Bank of India (RBI) has decided to amortize both borrowers and lenders against the unprecedented disruption caused by the Covid-19 outbreak, giving consumers a three-month grace period on loan repayments. It also provided banks with breathing space for default tagging in the event of customers missing payments.

Have a look at few questions and answers related to this EMI holiday which may rise in the public minds and get some meaningful insights!

Q: My EMI is due soon. Will the payment not to be deducted from my account?

A: The RBI has only allowed banks to permit a moratorium. Different banks would need to require EMIs to be suspended which means unless you have explicit permission from your bank, your EMIs will still be deducted from your account.

Q: How can I Know, whether my EMI was suspended or not?

A: The RBI has not yet given any detailed guidelines on this. Once the guide lines are released, there will be more precise clarification on this.

Q: How Banks will process?

A:  All banks will have to discuss the moratorium and have a decision approved by their board of directors. Once approved, customers can be contacted to notify them of the moratorium.

Q: What type of banks can offer their clients this deferment?

A: All commercial banks which include:

  • National rural banks
  • Small finance banks
  • Local area banks
  • Cooperative banks
  • All-India Financial Institutions
  • Housing finance companies
  • Microfinance institutions

Q: Is it a waiver of the EMIs or a deferment of the EMIs?

A: This is not a waiver, but a hold. RBI suggested that the repayment schedule and all subsequent due dates, as well as the tenor for such loans will be extended by three months across the board.

Q: Does this moratorium extend to both principal and interest?

A: Yes, yes. It is. If you are informed by your bank, you will be excluded from payment of the entire EMI, including payment and interest, for a period of three months. This will refer to all loans outstanding as of 1 March 2020.

Q: What kind of loans is covered by this moratorium?

A: The RBI policy statement specifically addresses term loans, which include:

  • Home loans
  • Personal loans
  • Education loans
  • Auto loans
  • Other fixed-term loans: include long-term consumer loans, such as mobile EMIs, refrigerators, TVs, etc.

Q: Does the moratorium cover the use of credit cards?

A: As credit cards are known as revolving credit and not term loans, they are not subject to a moratorium.

Q: I took a project loan to set up a company. Do I need to pay for my EMI?

A: A moratorium has been issued on any loan known as a term loan. When the bank is persuaded that you are not in a position to pay the EMIs, you will obtain a deferral.

Q: What has been announced by RBI for businesses?

A: The RBI has allowed interest payments to be deferred for all working capital loans taken by businesses. This will apply with respect to all operating capital assets pending as of 1 March 2020. Accumulated interest will be accrued for the duration after the expiry of the deferment period. The moratorium / deferral will not be viewed as a modification in the terms and conditions of the loan agreements and will not result in the reduction of asset classification.

Most of the individuals will benefit from the RBI’s relaxation of loan repayment which include retail borrowers, micro, small and medium enterprises and large companies.

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