3 Months EMI Moratorium during COVID-19

Reserve Bank of India (RBI) Governor Shaktikanta Das, on March 27th, in his 32-minute-long press conference made lot of announcements including repo rate cut, loan re-payment relief, EMI Moratorium and much more.

The announcement about 3 months EMI moratorium became a popular topic of discussion.

What did RBI say about it and what does it mean to us?

The CRUX:

1) RBI permitted all banking institutions to offer 3-month moratorium (holiday period) on all loan repayments. Please note that it is only a permission. It is your banker, who needs to approve this 3-month holiday period for your EMI. Once done, I assume that the banks will send a communication to its customers, confirming the 3 months holiday period. In a nutshell, the moratorium implementation lies with the banks.

2) RBI has suggested that the repayment schedule and all successive EMI due dates together with the loan tenure, should be adjusted by 3 months’ time across the board. Your loan tenure will get extended by 3 months to compensate for this holiday period. For example, if your loan is going to end by December 2020, then it will now end by March 2021.

Credit Cards:

There are lot of debates on whether this moratorium is applicable for credit card dues or not. Now, RBI clarified Moratorium can be extended to credit card payments as well. Again, the implementation lies with the banks.

Moratorium Period:

The 3 months moratorium period is from March to May. Many would have paid the March EMIs by now and so the moratorium will be effective only for 2 months and not 3 months. RBI can consider revising this period to start from April, so that everyone gets a 3-months holiday period.

Coverage:

The moratorium is applicable for all term loans like personal loans, home loans, auto loans, educational loans etc. Also, the home appliance loans taken for purchasing ACs, fridge, mobile phones will also be covered.

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