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Apr 09, 2020

FAQ - RBI's Moratorium on loan EMIs

The 3-month moratorium is applicable to all term loans. That means a personal loan, auto loans, home loans, corporate loans, education loans. As per the RBI release, banks are permitted to grant a moratorium of three months on payment of all instalments falling due between March 1, 2020 and May 31, 2020. These instalments include:

(i) principal and/or interest components;
(ii) bullet repayments;
(iii) Equated Monthly instalments;
(iv) credit card dues

Q. 1: What is a moratorium?

Answer: A moratorium implies that the borrower can delay the payment of their monthly EMI on loan for the repayment tenure. The interest, at the applicable interest rate, shall continue to accumulate on the outstanding portion of the loan amount during the moratorium time.

For example: If a moratorium of 3 months is allowed by the Bank, and a customer wants to avail of this benefit, then his Loan EMI for March, April and May 2020 gets suspended. From June 2020, the EMI restarts as per the choice opted for by the borrower.

Q. 2: What is the applicable term of the moratorium?

Answer: A moratorium of up to a maximum period of 3 months can be given by Bank. The banks are allowed to give moratorium for all instalments due between March 1st and May 31st, 2020.

Q. 3: My EMI is due soon. Will the payment not be deducted from my account?

Answer: The RBI has only allowed banks to allow a moratorium. Individual banks will have to allow suspension of EMIs. The borrower will have to request the bank and show that his or her income has been impacted by the coronavirus disruption. This means that unless you have specific approval from your bank, your EMIs will still be deducted from your account.

Q. 4: Is this a waiver of EMIs or a deferment of EMIs?

Answer: This is not a waiver, but a deferment. You will have to pay the EMIs at a later as decided by the bank. The RBI has told banks to have board-approved policies in place on moratorium/deferment.

Q. 5: Does the moratorium cover both principal and interest?

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

Q. 6: What kind of loans does the moratorium cover?

Answer: The RBI policy statement explicitly mentions term loans, which includes home loans, personal loans, education loans, auto and any loans which have a fixed tenure. They also include consumer durable loans, such as EMIs on mobiles, fridge, TV etc

Q. 7: Does the moratorium cover credit card payments?

Answer: Yes, Credit Cards Dues are also included.

Q. 8: Should I opt for EMI Moratorium?

Answer:

  • Yes, if your liquidity is stable for least 3/6 month. E.g Salaried employee
  •  No, If you predict a shortage of funds for reviving your Business.

Please note, it is not saving in your interest cost, it is like top-up om your loan for 3 months of the principal amount. Interest will be charges

Q. 9: Will it affect by CIBIL/ Credit Score?

Answer: NO, RBI explicitly states no CIBIL will be effected.

Q. 10: Does this mean that I will have to pay all 3 EMIs at one go in June?

Answer: 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.

Q. 11: Does the moratorium cover both principal and interest?

Answer: 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.

Q. 12: How to opt for a moratorium?

Answer: You can opt for a moratorium by either visiting a bank or bank website or go through the link that is sent to you through email and SMS. This is to allow you to close your option through the digital mode.

Q. 13: What happens if I don’t do anything?

Answer: If you don’t do anything i.e. neither opt-in or opt-out, then we do not change your account. The default choice is, thus, opt-out.

Q. 14: At what rate will I be charged interest during the moratorium period?

Answer: The interest will be charged as per the applicable interest rate on your loan.

Q. 15: What happens if I have already paid the March instalment?

Answer: In that case, the applicable moratorium period will be for the remaining 2 months.

Q. 16: If I have multiple loans do I have to apply for each one separately?

Answer: Yes, you will have to select the moratorium option for each account separately.

Q. 17: Can opting for the moratorium scheme adversely impact the credit score of the customer?

Answer: The postponement of the EMI/ Pre EMI payments during the moratorium period will not affect the customer’s credit score. During the pendency of the moratorium period, non-receipt of EMIs/Pre EMIs will not be classified and reported as default to the various credit bureaus.

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