What all RBI Guv said: EMIs put on hold, 75 bps rate cut as RBI declares war on Covid19 !! Moratorium period refers to the period of time during which you do not have to pay an EMI on the loan taken. This period is also known as EMI holiday. Usually, such breaks are offered to help individuals facing temporary financial difficulties to plan their finances better.
- Cash Reserve Ratio cut by 100 basis points to 3%
- A three-month moratorium on payment of installments of loans outstanding on March 1, 2020
- Repo Rate to be reduced by 75 basis points, from 5.15% to 4.4%
- Auction of targeted long term repo operations of 3-year tenor for total amount Rs 1,00,000 crore at floating rate.
- Reduction of CRR for all banks by 100 basis points. Will release Rs 1,37,000 crore across banking system.
- Accommodation under Marginal Standing Facility to be increased from 2% from SLR to 3% with immediate effect till June 30. It will release Rs 1.37 lakh crore into the system.
The Reserve Bank of India (RBI) today in a press conference announced that all banks and NBFCs have been permitted to allow a moratorium of 3 months on repayment of term loans outstanding on March 1, 2020. This also means that the tenure or time period of the loans (where moratorium is availed) will be automatically increased by 3 months.
The RBI in its statement said, “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.”
It is expected that all lending institutions will allow a moratorium on loan repayments as mentioned above. A moratorium of this nature would normally imply that individuals’ EMI repayments of loans taken would not be deducted from their bank accounts till the moratorium period is over. The loan EMI payments will restart only once the moratorium time period expires.
To ease the pressure of EMIs on retail loan borrowers as the country fights the deadly COVID-19, Reserve of Bank (RBI) Governor Shaktikanta Das March 27 cut repo rates by 75 basis points and allowed lending institutions to provide a three-month moratorium on EMI repayment on all term loans.
This means that no penal action will be taken against borrowers of home loans, personal loans, car loans, among others for not repaying EMIs for three months starting April.
RBI Governor Shaktikanta Das said all commercial banks, regional rural banks, small finance banks, cooperative banks, and non-banking financial companies are permitted to allow a three-month on EMI payments for term loans outstanding on March 1, 2020.
In keeping with RBI guidelines to link loan rates to external benchmarks, several banks had started offering all new floating rate home, auto and other retail loans with repo-linked lending rates starting October 1, 2019.
For customers who had availed loans at repo-linked, the cut in repo rate might mean a significant drop in the interest burden on your EMIs.
“The moratorium on term loans, …..will not qualify as a default for the purposes of supervisory reporting and reporting to credit information companies (CICs) by the lending institutions. Hence, there will be no adverse impact on the credit history of the beneficiaries,” the RBI Governor said.
This will ensure that your credit score does not get impacted by the permitted three-month delay in payment of EMIs.
However, it must be noted that the moratorium does not apply to credit card dues. Also, while the RBI has permitted banks to allow the moratorium, it depends on whether a particular bank chooses to extend these benefits to its customers.
Also, every bank adds a spread or premium to the repo rate or any other benchmark rate before working out retail loan interest rates. Depending on what the premium is the effective rate benefit on the loans could be lower than 75 basis points.
What does moratorium mean for you?
Moratorium period refers to the period of time during which you do not have to pay an EMI on the loan taken. This period is also known as EMI holiday. Usually, such breaks are offered to help individuals facing temporary financial difficulties to plan their finances better.