The Reserve Bank of India (RBI) today allowed all financial institutions to allow a three-month moratorium for all term loans in light of the COVID-19 outbreak and the subsequent lockdown.
- The RBI today allowed banks to offer a moratorium on all term loans.
- The step was taken in light of the COVID-19 outbreak and the subsequent lockdown
In effect, banks can allow all customers to not pay their monthly EMIs for a 3-month period, and the non-repayment will not hurt their credit score.
Here are all questions on this decision answered.
A: The RBI has said it has permitted allowed banks to extend a moratorium.
“Lending institutions shall frame board-approved policies for providing the abovementioned reliefs to all eligible borrowers,” the RBI later said in its guidelines.
This means that individual banks will have to frame policies allowing relief to customers. Whether it will cover all customers or only customers that request for relief will be decided by individual banks.
However, SBI chief Rajnish Kumar in a conference call said that all EMIs on term loans stand cancelled.
A: Once relief has been granted by your bank, non-payment will not result in any impact on credit score.
A: 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) can extend the moratorium.
A: This is not a waiver, but a deferment. RBI has recommended that the repayment schedule and all subsequent due dates as also the tenor for such loans may be shifted across the board by 3 months.
“Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period,” the RBI said in its guidelines.
A: Unlikely, as the RBI’s statement suggests the tenor may be shifted. That is: the loan may end 3 months later than was originally slated. But more clarity is awaited on this.
A: Yes. It does. You will be exempt from payment of your entire EMI, including payment and interest for three months. This will be applicable on all loans outstanding as on March 1, 2020.
A: The RBI policy statement explicitly mentions term loans, including agriculture term loans and crop loans besides retail loans.
Retail loans are typically home loans, personal loans, education loans, auto and any loans that have a fixed tenure. They also include consumer durable loans, such as EMIs on mobiles, fridge, TV etc
A: While credit cards are defined as revolving credit and not term loans, the RBI’s operational guidelines made it clear that credit card dues are also covered.
A: The RBI guidelines do not address this specifically but since credit card dues are covered, it is likely that loans taken on credit card may also be covered.
A: The RBI guidelines specifically mention retail loans. So a business loan is unlikely to qualify.
A: The RBI has allowed deferment for interest payments for all working capital loans taken by businesses. This will be applicable in respect of all working capital facilities outstanding as on March 1, 2020. The accumulated interest for the period will be paid after the expiry of the deferment period.
Moratorium/deferment will not be treated as change in terms and conditions of loan agreements and will not result in asset classification downgrade.
(Source: CNBC)
To get travel updates directly on your mobile, save and send a message at 9461777617 on Whatsapp to start.
Advertisement
Also Read, Coronavirus: All Airlines Advisory On Cancellation and Amendment
