RBI EMI Moratorium: Find who will get it

To deal with the hardship caused due to the outbreak of COVID-19 and the subsequent lockdown, the Reserve Bank of India today announced cut in benchmark interest rate by 75 basis points to 4.4 per cent. This cut in the repo rate is the lowest in at least 15 years. The apex bank has also slashed the reverse repo rate by 90 basis points to 4 per cent.

Besides, the central bank also allowed all financial institutions to allow a three-month moratorium for all term loans. In response to it, the banks can allow its customers to not pay their monthly EMIs for 3 months and the non-repayment will not hurt their credit score based on which further loans are decided. As per the RBI policy statement, the facility will be provided on term loans that include home loans, personal loans, education loans, auto loans and other loans, which have a fixed tenure like consumer durable loans taken for mobiles, fridges and TV among others.

But, the moratorium doesn't cover the credit card payments as credit cards are defined as revolving credit and not term loans. Bu this facility will be provided only if individual banks will allow the suspension of EMIs. This means a person's EMIs will be deducted from your account if you don't give a specific approval from your bank. More clarity on this facility will come only after RBI issues certain guidelines in this regard.

This deferment in payments of the EMIs will be provided by all commercial banks, co-operative banks and NBFCs. This deferment may shift the repayment schedule and all subsequent due dates and the tenor of for such loans across the board by three months.

When it comes to working capital loans taken by businesses, then RBI has allowed deferment for interest payments, which will be applicable on 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. However, the moratorium/deferment will not be treated as a change in terms and conditions of loan agreements and will not result in asset classification downgrade. Similarly, the moratorium has been allowed on any loan that is classified as term loans but it will be provided only if the bank is convinced that you are not in a position to pay your EMIs.

Note: The banks can offer this facility to its customers only after having a discussion on moratorium with its board and getting it approved with them. Once approved, they may reach out to customers informing them of the moratorium.