• Kandivali West Mumbai 400067, India
  • 022 39167251
  • support@email.com
March 27, 2020

RBI allows 3-month moratorium on all Loans. How it will impact your EMI – FAQ

by facelesscompliance in Corporate Law

Moratorium on Term 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 and micro-finance institutions) (“lending institutions”) are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020. Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, may be shifted across the board by three months.

Deferment of Interest on Working Capital Facilities

In respect of working capital facilities sanctioned in the form of cash credit/overdraft, lending institutions are being permitted to allow a deferment of three months on payment of interest in respect of all such facilities outstanding as on March 1, 2020. The accumulated interest for the period will be paid after the expiry of the deferment period.

The borrowers to tide over the economic fallout from COVID-19. Hence, the same will not be treated as change in terms and conditions of loan agreements due to financial difficulty of the borrowers and, consequently, will not result in asset classification downgrade. The lending institutions may accordingly put in place a Board approved policy in this regard.

Easing of Working Capital Financing

In respect of working capital facilities sanctioned in the form of cash credit/overdraft, lending institutions may recalculate drawing power by reducing margins and/or by reassessing the working capital cycle for the borrowers. Such changes in credit terms permitted to the borrowers to specifically tide over the economic fallout from COVID-19 will not be treated as concessions granted due to financial difficulties of the borrower, and consequently, will not result in asset classification downgrade.

In respect of the rescheduling of payments will not qualify as a default for the purposes of supervisory reporting and reporting to credit information companies (CICs) by the lending institutions. CICs shall ensure that the actions taken by lending institutions pursuant to the above announcements do not adversely impact the credit history of the beneficiaries.

FAQ ON IMPACT ON LOANS

The RBI has allowed deferment for interest payments for all working capital loans & Term Loans taken by businesses. This will be applicable in respect of all outstanding as on March 1, 2020. The accumulated interest for the period will be paid after the expiry of the deferment period.

What will happen to your Next EMI?

The RBI has only allowed banks to allow a moratorium.  You need to request Bank if you want to deffer payment due to cash flow issues. Banks has to take approval from borad and communicate to customers

Is the moratorium cover both principal and interest?

Yes. It does. If announced by your bank, you can forego payment of your entire EMI, including payment and interest

Is this a waiver of EMIs ?

This is not a waiver, but a deferment to a later date

What kind of loans are covered?

Term loans, which includes home loans, personal loans, education loans, auto  and any loans which have a fixed tenure, including consumer durable loans, such as EMIs on mobiles, washing machine. television, etc. RBI clarified Credit Cards arecovered under the moratorium.

RBI has also been conducting many other monetary operations for better liquidity management as it scrambles to keep the banking sector healthy in a bid to support the economy in the wake of the novel coronavirus pandemic

Highlights on rate cut

Cash Reserve Ratio (CRR) of all banks have been reduced by 100 basis points to 3 per cent of net demand and time liabilities with effect from the fortnight beginning March 28 for a period of 1 year.

RBI to inject liquidity worth Rs 3.74 lakh crore into the system.

Monetary policy committee voted 4:2 majority to cut repo rate by 75 basis points.