While loan borrowers are excited about the RBI's 3-month moratorium on fixed-term loans and EMI, they should be aware of the impact and consequences of availing such moratorium. Let us disucus what the provision actually means and how it would impact borrowers in the longer run.
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  • RBI's 3-month Moratorium is not a Waiver!

    Let's begin with a much needed clarification for unaware loan borrowers - the RBI's 3-month moratorium is 'not a waiver' of any kind and it simply means that the repayment schedule of all such loans would be shifted forward by three months. Many borrowers have been celebrating in the misinterpretation of the announcement thinking that the RBI has waived off EMIs on their loans for 3 months. That is not what the moratorium means.
  • Here are few articles on this, Hopefully, they would help to understand the Moratorium better -

    No EMIs for three months on home loans: RBI

    The moratorium on term loans and the deferring of interest payments on working capital will not result in asset classification downgrade. EMIs will resume after the moratorium period gets over.
    NEW DELHI: Reserve Bank of India has permitted a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020. This means, no EMI would be deducted from the account of anyone who has a loan outstanding.

    The moratorium on term loans and the deferring of interest payments on working capital will not result in asset classification downgrade. EMIs will resume after the moratorium period gets over.

    "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," said RBI.

    "It is pertinent to note that total outstanding loans of real estate developers from Commercial banks, NBFC s and HFCs is estimated to be around Rs 4.5 lakh crore as of March 2020. At the same time, this moratorium will definitely benefit homebuyers as these financial institutions have lent an estimated Rs 20 lakh core as of March 2020," said Ramesh Nair is the CEO & country head of JLL India.

    The central bank during its seventh bi-monthly monetary policy meeting said, alongside liquidity measures, it is important that steps are taken to mitigate the burden of debt servicing brought about by disruptions on account of COVID-19 pandemic. Such steps, in turn, will go a long way to prevent the transmission of financial stress to the real economy, and ensure the continuity of viable businesses and provide relief to borrowers in these extraordinarily troubled times.

    "If benefits are passed on to the home loan seekers we expect the market to take the pre-2007 trajectory. EMI burden has been making many people to defer buying homes and wait for the favorable conditions. After the current announcement by RBI, if banks bring down the EMIs then we expect a new windfall of buyers," said Amit Raheja, CMD, Wealth Clinic.

    Apart from this, 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 moratorium of three months on the term loans including home loans by RBI would provide relief for the real estate sector to focus more on the operational requirement and recalibrate the business strategies," said Kamal Khetan, chairman and managing director, Sunteck Realty

    The moratorium on term loans, the deferring of interest payments on working capital and the easing of working capital financing 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.


    Confused About Credit Card Dues, Home Loan EMI After RBI Announcement? Here's What it Means

    RBI has made a one-time exception in view of the financial distress arising out of the global pandemic coronavirus and the economic havoc wreaked by the lockdown imposed to control its spread.

    Updated:March 27, 2020, 11:22 PM IST

    Picture for representation.

    New Delhi: The Reserve Bank of India on Friday announced that banks are permitted to allow a three-month moratorium on payment of instalments of all term loans outstanding on March 1, 2020.

    The decision will be applicable to all regional, rural banks, co-operative banks, NBFCs including Housing Finance Companies, however the final decision on passing on the benefit to customers will rest with the banks.

    The RBI said the moratorium will not result in asset classification downgrade and will have no adverse impact on the credit history of the borrowers.

    A moratorium period is a time during the loan term when the borrower is not required to make any repayment. Normally, the repayment begins after the loan is disbursed and the payments have to be made each month. However, the RBI has made a one-time exception in view of the financial distress arising out of the global pandemic coronavirus and the economic havoc wreaked by the lockdown imposed to control its spread.

    The decision, announced by RBI Governor Shaktikanta Das after a Monetary Policy Committee meeting, will bring relief to the middle class who had been demanding a relaxation on EMI payments as a new month approaches.

    Here are the common questions arising from the move:

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

    The RBI has only allowed banks to allow a moratorium. Individual banks will have to allow suspension of EMIs. This means that unless you have specific approval from your bank, your EMIs will still be deducted from your account.

    How will I know if my EMI has been suspended?

    The RBI has not yet issued detailed guidelines on this. Once guidelines are issued, there will be more clarity specifically on this.

    How will the process work at the bank level?

    All banks will have to discuss the moratorium and get a decision approved at their board level. Once approved, they may reach out to customers informing them of the moratorium.

    If my bank suspends my EMIs, will non payment result in impact on my credit score?

    No. It will not.

    Which banks can offer this deferment to their customers?

    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) included.

    Is this a waiver of EMIs or a deferment of EMIs?

    This is not a waiver, but a deferment. RBI has recommended that the repayment schedule and all subsequent due dates as also the tenor for such loans may be shifted across the board by 3 months.

    Does the moratorium cover both principal and interest?

    Yes. It does. If announced by your bank, 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.

    What kind of loans does the moratorium cover?

    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. The also include consumer durable loans, such as EMIs on mobiles, fridge, TV etc

    Does the moratorium cover credit card payments?

    Yes, a clarification issued by the RBI says credit card dues will also be covered under moratorium. This means all payment against money borrowed using a credit card will also not be required to be paid for three months.

    I have taken a project loan for setting up a factory. Can I not pay my EMI?

    The moratorium has been allowed on any loan classified as term loans. If the bank is convinced that you are not in a position to pay the EMIs, you will get a deferrment.

    What has the RBI announced for businesses?

    The RBI has allowed deferment for interest payments for all working capital loans taken by businesses. This will be applicable in respect of 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. Moratorium/deferment will not be treated as change in terms and conditions of loan agreements and will not result in asset classification downgrade.


    RBI’s moratorium: Don't stop your loan EMIs if you can afford to pay

    Know how to make the most out of RBI’s relief package for borrowers

    Retail borrowers concerned about the impact of COVID-19 on their finances, and thus, their ability to repay their loans have got some breathing space, thanks to the Reserve Bank of India’s (RBI’s) mega relief package announced on Friday.

    They stand to benefit from the policy rate cuts, and a moratorium on all term loans, including home, auto, education, personal and credit card dues. The measures will benefit especially those whose equated monthly instalments (EMI) are due between March 1, 2020 and May 31, 2020. Considering the state of paralysis the domestic and global economies are slipping into, the RBI has given borrowers a lifeline to tide over any temporary financial crunch.

    Choose shorter tenure, not lower EMIs

    The repo rate cut of 75 basis points – from 5.15 per cent to 4.4 per cent – will mean huge savings on interest outgo for retail borrowers, particularly the ones whose home loans are linked to repo rates.

    The State Bank of India (SBI) late on Friday evening announced transmission of the 75 bps cut to its repo-linked home loan borrowers with effect from April 1, as also a 20-50 bps reduction across tenures in retail deposit rates from March 28. Its repo-linked lending rate (RLLR) now stands reduced to 6.65 per annum from 7.40 per cent earlier. The new effective home loan rates will start from 7.15 per cent, down from 7.9 per cent at present. “Consequently, EMIs on eligible home loan accounts (linked to an external benchmark rate/RLLR) get cheaper by around Rs 52 per 1 lakh on a 30-year loan,” the SBI said in a statement.

    All retail floating rate loans sanctioned by banks after October 1, 2019 have to be linked to an external benchmark – it’s the repo rate for most banks. These borrowers will benefit from a 75-bps rate reduction, when their bank resets the rates, which is once a quarter. “Banks tend to extend the loan tenure where possible and reduce the EMI. However, if you can afford to, it’s best to keep the EMI intact, so your overall interest payable goes down and your loan can be paid off faster,” advises Vipul Patel, Co-founder, Mortgageworld.in, a loan consultancy firm.

    Even if your loans are linked to banks’ marginal cost of funds-based lending rate (MCLR), you will see your interest rates soften, as banks pass on the benefit of lower cost of funds to you. SBI has indicated that it will take a call on MCLR on April 20. If your bank does not pass on the entire benefit of RBI policy action, look at switching to an external benchmark-linked home loan. Even if current MCLR and repo-linked interest rates are comparable, the greater transparency that the latter offers makes it a useful proposition for borrowers.

    Apart from the repo rate cut, the central bank has also slashed the cash reserve ratio (CRR) by 100 basis points. “Overall, the ample liquidity in the system will lower the cost of funds, which in turn will be passed on to borrowers,” says Siddhartha Mohanty, Managing Director and CEO, LIC Housing Finance. While housing finance companies’ retail floating rate loans are not linked to external benchmarks, softening of interest rates in the system will be transmitted to borrowers. Again, you should adopt the same approach: partial transmission of rate cut should prompt you to first negotiate with your lender and then consider switching to another institution that offers better terms.

    Moratorium, the last resort

    The moratorium and its implementation have attracted more attention than the substantial repo rate cut itself. It will cover all term loans, including retail loans – home, auto, personal and education – and credit card dues.

    However, banks and lending institutions are yet to formalise the operational nitty-gritties. “It will help borrowers affected by the cash crunch due to COVID-19 impact. Borrowers can contact us to avail of this deferment. We will soon have a board-approved policy in place to extend the moratorium to those who need the flexibility,” says Mohanty.

    The lenders, however, are yet to decide whether the moratorium will be extended to all borrowers by default or they will be given the option to seek this flexibility. “Many borrowers have given us an electronic clearing scheme (ECS) mandate to deduct EMI payments. We will discuss and frame a strategy on how to implement this facility,” says Virendra Sethi, Head, Mortgages and Retail assets, Bank of Baroda.

    Now, a moratorium leads to postponement of your EMI payments and is meant to be used only in exceptional circumstances. “If you can, you must keep meeting your EMI commitments. This, along with the drastic rate reduction can ensure that you prepay your loan ahead of schedule and save on substantial interest outgo in the process,” advises Patel. Loan consultancy firm Mortgageworld.in’s calculations show that if a home loan borrower with an outstanding home loan of Rs 45 lakh and balance repayment tenure of 300 months were to avail of the moratorium, she will net interest savings of close to Rs 11.59 lakh over the entire tenure in the current situation, provided she maintains the current EMI of Rs 34,731. However, if she does not opt for the moratorium, her savings would be higher, at close to Rs 15.39 lakh (see table). Therefore, use the facility only if you are in financial distress.

    The central bank has made it clear that interest will continue to accrue during the period. “A moratorium is not an interest waiver. Affordability permitting, it is better to pay your EMIs instead of letting your funds idle away in a savings bank account that yields 3.25-4 per cent interest. Ultimately, you will have to pay your EMIs after the moratorium period ends,” says Gaurav Gupta, Founder and CEO, Myloancare, a loan aggregation portal.

    Strive to pay off credit card dues

    The RBI has clarified that credit card dues, too, are covered under the moratorium flexibility. However, credit card users should also remember that since moratorium merely defers the payment, your dues will continue to accumulate interest during the moratorium or until you clear the bills. While the burden could be manageable for home loan borrowers given the prevailing benign interest rate regime, this may not be the case with credit card users. Being unsecured loans, the interest charged is exorbitant, upwards of 40 per cent per annum. Interest accrued on your credit card bill could balloon to an unmanageable amount if you do not make attempts to clear the dues.


  • SBI Plans To Offer Moratorium To All Term Loan Customers

    Mar 30 2020, 5:18 PMMar 30 2020, 8:40 PMMarch 30 2020, 5:18 PMMarch 30 2020, 8:40 PM

    India’s largest lender State Bank of India is likely to offer a three-month moratorium to all its term loan borrowers, as a way to ensure the quick pass-through of relief measures announced by the Reserve Bank of India.

    SBI will offer the moratorium to all customers rather than making individual assessments, two senior officials told BloombergQuint on condition of anonymity. The moratorium will also be offered to working capital facilities availed by micro, small and medium enterprises, the officials said.

    Borrowers who are not impacted by disruptions related to Coronavirus can opt-out and continue to make payments after informing the bank, the officials said.

    India’s largest lender is of the opinion that a selective approach toward implementing the moratorium could be too cumbersome and delay the relief, the people quoted above said.

    The bank will also extend the relief to securitised loan pools that it has purchased with underlying assets that qualify for the moratorium, the officials said.

    As part of its plan the bank will initiate a special communication campaign, detailing the specifics of the moratorium and how it would impact a borrower’s repayment schedule. Through the campaign, the bank would also encourage borrowers to opt-out of the moratorium if they have not witnessed any disruption in their income and are capable of repaying their loans on time.

    The bank’s board will meet later this week to finalise the implementation of the moratorium and come out with a standard operating procedure, the bankers quoted above said.

    Response to a query emailed to SBI on Monday evening is awaited.

    During a conference call with reporters on Friday, SBI Chairman Rajnish Kumar had said that repayments worth Rs 50,000-60,000 crore could fall under the three-month period between March 1 and May 31. The bank will not suffer any profitability issues due to the moratorium, since the interest earned on these loans is only an accounting entry.“We will continue accruing interest on the loans as per RBI guidelines, just that the cash will be received at the end of the 90 days,” Kumar said.

    As of December 31, 2019, SBI’s total domestic advances stood at Rs 19.78 lakh crore. Of this, Rs 7.19 lakh crore were to retail borrowers, Rs 2.09 lakh crore to agriculture borrowers, while SME borrowers had outstanding loans worth Rs 2.78 lakh crore and large corporate borrowers owed Rs 7.71 lakh crore to the bank.

    On Friday, the Reserve Bank of India allowed lenders to offer three-month moratorium but left it to bank boards to decide the final contours of the policy.

    As part of the moratorium, lenders can push the repayment schedule of a term loan or working capital facility by three months, without downgrading the asset classification of the borrower. The borrower’s credit history or credit rating will also not be affected by the moratorium, said the regulator.

    However, the interest on the repayments will continue to accrue for this three month and the borrowers will have to repay their lenders after that period ends. The moratorium can be applied to any term loan installment, the RBI said. Retail and corporate loans, equated monthly installments, bullet repayments and credit card dues will be covered under the moratorium, as per the RBI’s detailed circular.

    Some examples of loans on which borrowers can seek relief include home loans, auto loans, loans against property, project loans, construction finance, etc. According to data released by the RBI, as of January 31, total non-food credit from the banking system stood at over Rs 89 lakh crore, which included nearly Rs 25 lakh crore in retail loans, Rs 4.8 lakh crore in MSME loans and Rs 23 lakh crore in loans to large industry

  • Decoding RBI’s 3-month EMI, loan moratorium: Should you avail it?

    RBI has allowed banks to provide a 3-month moratorium on fixed-term loans and EMI recently. But those availing it should note that there are consequences of not paying instalments for 3 months. Read on.

    Individuals who can pay their credit card dues should clear it before the due date, despite the RBI's moratorium option. (Photo: Reuters)


    The Reserve Bank of India (RBI) recently allowed banks in the country to provide a three-month moratorium on fixed-term loan and EMI payments to help millions of people with bank dues during the novel coronavirus pandemic.

    The banking regulator, however, did not order banks to provide such a relief. It gave the option to banks to take a call on whether they are in a position to extend the measure for customers.

    Simply put, banks are not obligated to fulfil the RBI’s suggestion and can choose to ignore it on the basis of financial health. The country’s biggest public lender State Bank of India (SBI) has announced it would honour RBI’s request.

    A moratorium, not waiver

    Many economic experts said the terminology used by the RBI in the matter raised many doubts. Some reports show banks are still not ready to take any action on this announcement.

    "In respect of all term loans (including agricultural term loans, retail and crop 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) (lending institutions) are permitted to grant a moratorium of three months on payment of all instalmentsfalling due between March 1, 2020, and May 31, 2020," RBI said.

    "The repayment schedule for such loans as also the residual tenor will be shifted across the board by three months after the moratorium period. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period," it said.

    The last part of RBI’s statement on moratorium is exactly why individuals should not opt for the relief measure unless they absolutely need it.

    Individuals should continue paying their credit card, EMI, retail loan instalments if they are not financially strained due to the ongoing Covid-19 lockdown.

    For instance, if you avoid paying the monthly instalments on dues, then your interest will be calculated on a higher amount every month.

    For high-ticket loans like home or vehicle loans, not paying the monthly dues for the next three months could increase the amount of interest you pay significantly.

    Therefore, it is a last-ditch option for those who are facing deep fund crunch due to the prevailing situation in India due to Covid-19.

    So the only relief one technically gets here is no impact on credit score due to non-payment for the next three months. This means the bank will not report defaults on such loans to credit score authorities for the next three months.

    Try to clear off credit card dues

    Individuals who can pay their credit card dues should clear it before the due date, despite the RBI’s moratorium option. Credit cards usually charge a much higher interest rate than other lending instruments.

    Experts also say that credit card late payments can significantly increase dues as they get added directly to the bill. Therefore, if you are a credit card holder, paying monthly dues is the best practice, even if there is a moratorium of three months.

    Individuals who have taken a marginal hit due to Covid-19 lockdown could try to clear at least the minimum balance due to avoid a sharp shock later.

    Credit-card based payment app, CRED, also sent a note to all its app users informing them about the consequences of not paying instalments.

    "CRED recommends that you continue paying your total due amount (or as much as possible) within the due date to avoid interest charges at 36 - 42 per cent compounding annual interest rate if you can," it said in its note.

    In a nutshell, the RBI’s moratorium on loans is not a waiver offering immunity from rising interests.

    This is necessary for only those who are facing a financial crunch due to the ongoing economic turmoil due to the lockdown.

    While SBI has already announced that it will honour the RBI’s recommendation, top private banks like HDFC Bank, Axis Bank and ICICI Bank are likely to come out with communication by tomorrow for customers.

  • Canara Bank acting really fast here. This is from their Twitter page -

  • This is from Indian Bank Twitter page -

  • Why RBI moratorium on your credit card dues is a bad idea It only means no repayments for the three months, but interest on your credit card dues and loan outstanding will keep accruing each month.

    Since interest rate on credit cards could be as high as 40 per cent, deferring the repayments could cost you bomb

    The Reserve Bank of India has allowed banks to offer a moratorium of three months on not just term but also on credit card loans for the period between March 1 and May 30. Before you go for it, you must understand moratorium doesn't mean waiver of your credit card bill or EMIs. It only means no repayments for the three months, but interest on your credit card dues and loan outstanding will keep accruing each month. The only respite will be that your credit score will not be hit. Since interest rate on credit cards could be as high as 40 per cent, deferring the repayments could cost you bomb.

    "Credit card debt is unsecured and costly. The annualised rate of interest on credit card debt can easily be in the 40 per cent range, which is a lot compared to secured debt - home loans, for example, are currently priced around 8 per cent. Those who don't have ongoing liquidity problems can continue their repayments since they have little to gain by paying additional interest on an already pricey debt," says Adhil Shetty, CEO of BankBazaar.com.

    Credit card payment start-up CRED explains this with an example:

    If you have Rs 1,00,000 due as on March 3, 2020 and you take advantage of the moratorium till May 31, 2020, the dues payable on June 3, 2020 could be as high as Rs 1,15,000 -- Rs 1,00,000 (due amount) + Rs 15,000 (interest amount and other charges).

    You may have to shell out the entire amount right after the end of moratorium, otherwise penalty/late payment charges will kick in. If you pay the minimum due, you may avoid the late payment charges but interest rate will be levied on the outstanding amount.

    "You should continue paying your total due amount (or as much as is possible) within the due date to avoid interest charges at 36 - 42 per cent compounding annual interest rate," says Kunal Shah, founder and CEO, CRED.

    So, if your payment is due anytime soon, you must approach your bank immediately and inquire about two things: Is the RBI moratorium mandatory for all borrowers or optional? If it is optional, you should make the payment by the due date. If it is mandatory or you are facing a cash crunch, you must check with them the details and conditions of the moratorium, especially rate of interest being applied and timing of the repayment. "You need to see the rate of return being applied by card providers during the break. Also check if they will recover the interest immediately after May 31," suggests Shetty.

    If your credit card dues are substantial and you cannot pay it off right now, instead of opting for moratorium, you may take some personal loan to clear out your dues. "If your credit card bill may take a year or longer to pay off, do the interest math. Personal loan rates start from around 10 per cent and may be cheaper in the long run. But, you must be a smart borrower with stable income to be able to pay off one debt with another," says Shetty.

  • Covid-19: Banks sensitise branches on EMI moratorium, other RBI relief measures
    PTI31 March 2020

    New Delhi, Mar 31 (PTI) Banks have started sensitising their branches about three months' moratorium on all term loans, including home, auto and crop loans, to help customers in overcoming financial difficulties due to the coronavirus outbreak and subsequent nation-wide lockdown.

    Several banks on Tuesday said they have informed and provided their branches with the detailed guidelines on various schemes announced by the RBI recently and customers are being sent messages individually on their registered mobile number about the EMI payment.

    Union Bank of India Managing Director Rajkiran Rai G told PTI that branches have been informed about with respect to moratorium on all term loans.

    'In case of those who have opted for ECS route for EMI deduction, customers are given the option of availing the facility by informing the branch concerned through mail or other digital medium,' he said.

    Banks on its own unilaterally cannot stop ECS payment due to legal issue but the customer has the option of requesting bank to stop it, Rai said.

    He further said the customers whose income has not been impacted are encouraged to continue payment as per the scheduled.

    'As per COVID 19 regulatory package of RBI, Indian Bank allows a moratorium by deferring payment of EMI/ Term Loan Instalments & Interest/ Interest on Working Capital for 3 months w.e.f 1st March 2020,' a tweet issued by the banks said.

    Another public sector lender PNB said it presents relief scheme for its customers. 'In view of COVID-19, it has been decided to defer payment of all installments on term loan and recovery of interest on cash credit facilities falling due between March 01,2020 and May 31 2020.' Canara Bank tweeted, 'In terms of Covid 19 - RBI package, borrowers are eligible for moratorium/ deferment of installments/EMI for Term loans falling due from 01.03.2020 to 31.05.2020 & repayment period gets extended accordingly. SMS also has been sent to customers to avail the same.' With banks clarifying their positions on EMI moratorium, it will help clear doubts of customers who were confused after getting payment reminders from lenders. Last Friday, the RBI had announced that all term loans, including retail and crop loans and working capital payments, will be covered by the three-month moratorium. Banks will now have discretion in deciding the limits on working capital, with RBI saying that no payment miss should be considered a default and reported to credit information companies.

    'The repayment schedule for such loans as also the residual tenor, will be shifted across the board by three months after the moratorium period. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period,' the RBI said.

    Deferred instalments under the moratorium will include principal and/or interest components, bullet repayments, EMIs, credit card dues, it said.

    'Lending institutions shall frame board-approved policies for providing the above mentioned reliefs to all eligible borrowers. Wherever the exposure of a lending institution to a borrower is Rs 5 crore or above as on March 1, 2020, the bank shall develop an MIS on the reliefs provided to its borrowers which shall inter alia include borrower-wise and credit-facility wise information regarding the nature and amount of relief granted,' it said.

    Following the announcement, the banks just had one working day to finalise the details and issue instructions to branches, a senior official of another public sector bank said.

    As soon as finer points on implementation of moratorium came from the Reserve Bank, the official said, board approval was sought as per the direction of the central bank and necessary instructions have been issued to staff regarding their implementation.

    Yesterday, the Agriculture Ministry said that farmers will continue to get short-term loan of up to Rs 3 lakh at a subsidised interest rate of 7 per cent, and prompt repayers will get it at four per cent as the government extended the subsidy to banks till May 31.

    The decision, which are implemented through banks, comes as many farmers are not being able to go to banks for payment of their loan dues on account of restrictions imposed due to the lockdown.

    Besides, FAQ are expected to be issued by Indian Banks Association on the various measures announced by the Reserve Bank to the benefit of customers. PTI DP MKJ


  • Interest shall continue to accumulate

    The moratotium will push the repayment schedule and the residual tenor further by 3 months. However, interest on the outstanding loan amount shall continue to be charged and accumulate even during the moratorium period.
  • RBI's 3-month Moratorium is a permission and not an order to the banks

    The RBI has permitted banks to allow their borrowers to postpone the repayment by 3 months under the moratorium. However, the decision is solely at the discretion of banks and they may or may not allow their borrowers to do so.
  • Make banks comply with RBI moratorium on EMIs: Manish Tewari

    Party spokesman Manish Tewari made this demand to the ministry amid reports that many banks were proceeding to follow the regular EMI deduction schedule despite the RBI’s nod for deferring them for three months.

    ET Bureau|
    Last Updated: Apr 01, 2020, 12.29 AM IST


    Migrant workers are also being looked after. With strong will, you can solve many problems,” she tweeted.

    New Delhi:Congress urged the Union finance minister to intervene not only to ensure banks comply with the Reserve Bank of India’s directive for deferring payments of equated monthly instalments (EMIs) on all loans for three months due to the Covid-19 emergency but also to provide subvention of interest rate of the deferred EMIs.

    Party spokesman Manish Tewari made this demand to the ministry amid reports that many banks were proceeding to follow the regular EMI deduction schedule despite the RBI’s nod for deferring them for three months. He demanded that the FM immediately make the banks issue the necessary notifications in line with the RBI-advised three-month moratorium and stressed that the subvention of interest rate on EMIs for the threemonth period was equally important to ensure the intended relief for customers.

    The main opposition party also urged the Union ministries of finance, agriculture and food supplies to coordinate an action plan to help the farmers who are finding it difficult to harvest, store and market their rabi crop.

    Meanwhile, All India Congress Committee general secretary Priyanka Gandhi Vadra complemented the governments of Congress-ruled states for their efforts against Covid-19. “The state governments of Rajasthan, Punjab, Chhattisgarh have been fully prepared to face this crisis.

    Ration is reaching door to door.

    Many private hospitals have been taken over by the government for this phase. Hotel rooms are being converted into isolation wards. The state’s employees have been taken care of.

    Migrant workers are also being looked after. With strong will, you can solve many problems,” she tweeted.

    Congress’s Demand:
    Congress’s demand comes after reports that many banks are proceeding to follow the regular EMI deduction schedule despite RBI’s nod for deferring them for 3 months.

    Tewari demands that FM immediately make banks issue the necessary notifications in line with the RBIadvised 3-month moratorium and stresses that subvention of interest rate on EMIs for 3-month is equally important for relief to customers.

  • RBI's loan EMI moratorium proposal for borrowers: Here's all you need to know

    Sunil Mehta, Chief Executive, Indian Banks’ Association (IBA)answers some common questions regarding the 3-month moratorium on loans announced by the Reserve Bank of India

    ET Online|
    Last Updated: Apr 01, 2020, 09.28 AM IST

    Borrowers have a lot of questions regarding the three month moratorium on loans announced by the Reserve Bank of India last week. The RBI allowed all lending institutions to offer a moratorium to borrowers on repayment of all term loans. The moratorium also covered credit card dues.

    The moratorium was for payment of all instalments falling due between March 1, 2020 and May 31, 2020. However, it was also stated that "Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium."

    Sunil Mehta, Chief Executive, Indian Banks’ Association (IBA)answers some common questions regarding the above on the Central Bank of India and Oriental Bank of Commerce websites.

      Why RBI has announced the relief package?
      Reserve Bank of India has announced certain regulatory measures to mitigate the burden of debt servicing brought about by disruptions on account of Covid-19 pandemic and to ensure the continuity of viable businesses. It was felt that there may be a temporary disruption in the Cash Flows, and in some cases loss of income, for the businesses/individuals and the present measures work to bring relief to those businesses /individuals.
      Which are the facilities eligible for availing the benefits under the RBI Covid19 regulatory package and whether the facility is extended across the board to all borrowers?
      All Term Loans (including Agricultural Term Loans, Retail, Crop Loans and loans under Pool Purchases) and Cash Credit/Overdraft are eligible to avail the benefits under the package. This is available to all such accounts, which are Standard Assets as on 1st March 2020. Further, to avoid unnecessary paperwork the facility has been extended across the board to all the borrowers by extending repayment of Term Loan instalments (includes interest) by 90 days. The original repayment period for Term Loans will get extended by 90 days e.g. a loan repayable in 60 instalments maturing on 1st March 2025 will mature on 1st June 2025.
      Is rescheduling of payments applicable for all kinds of Terms Loans?
      It is applicable for all Term Loans in all the Segments, irrespective of the Segment and the tenor of the Term Loans.
      Is rescheduling of Term Loans only for Principal amount or it also includes interest?
      Rescheduling of Principal can be done for a period of three months falling due between March 1, 2020 and May 31, 2020. For example, where the last instalment of a Term Loan falls due for payment of on say 1st March 2020, it will become payable on 1st June 2020. For EMI based Term Loans, it will be three EMIs falling due between 1st March 2020 and May 31st, 2020 and the tenor will be extended by three months and have to be repaid during the extended period, as per the example under (2) above. For other Term Loans, it will be all the instalments and Interest falling due during the same period, irrespective of the tenor of payment i.e. Monthly, Quarterly, Half Yearly, Annually, Bullet Payment etc. For Term Loans, where the repayment has not commenced, the interest portion for three months alone needs to be reckoned.
      What happens if the extended Tenor of Term Loan goes beyond the maximum period stipulated for a Product or as stipulated in the Loan Policy?
      This can be extended for all such Term Loans without the need for seeking deviations or approvals.
      What will be the treatment of interest on the Working Capital facilities?
      The recovery of Interest applied to Cash Credit/Overdraft on 31st March, 30th April and 31st May 2020 is being ‘deferred’. However, the entire interest must be recovered along with the interest being applied on 30th June 2020 and in cases, where monthly interest is not being applied, along with the next interest date.
      What will be the impact of this relief by RBI on borrowers as far as reporting of default is concerned?
      Any delay in payment leads to default and gets reported to Credit Bureaus. For business loans of Rs. 5 Crores and above, the Banks report the overdue position to RBI also through CRILC. As a result of this relief package, the overdue payments post 1st March 2020 will not be reported to Credit Bureaus/ CRILC for three months. No penal interest or charges will be payable to the Banks. Similarly, SEBI has allowed that Credit Rating Agencies (CRAs) may not consider the delay as default by listed companies if the same is owing to lockdown conditions arising due to Covid-19.
      That means Businesses/ Individuals should necessarily take the benefit?
      You may take the benefits under this package if there is a disruption in your cash flows or there is loss of income. However, you must take into account that the interest on the loans, though not mandatorily payable immediately and gets postponed by 3 months, continues to accrue on your account and results in higher cost. To give you a perspective, suppose your loan outstanding is Rs 100,000 and you are charged 12% rate of interest on your loans, then every month you are liable to pay Rs. 1000 as interest. In case you opt not to service the interest every month, you are liable to pay interest at 12% p.a. and accordingly you will pay Rs. 3030.10 at the end of 3rd month. Similarly, in case the interest rate is 10%, you are required to pay Rs. 833 p.m. or Rs. 2521 after three months.
      Should I get upset if any Bank Staff or its collection agent approach me for repayment?
      You should not get upset and tell Bank Staff/ Collection Agent that you want to avail the benefit being extended under regulatory package.
      What about my Credit Card dues?
      The relief is available for Credit Card payments also. In case of Credit Card dues, there is a requirement to pay minimum amount and if it is not paid the same gets reported to Credit Bureaus. In view of the RBI Circular, the overdues in the Credit Card account donot get reported to the credit bureaus for a period of three months. However, interest will be charged by the Credit Card issuer on unpaid amount. You should check from your Card provider to arrive at interest payable. Although no penal interest will be charged during this period, but you must remember that the interest rate on Credit card dues are normally much higher compared to normal bank credit and you should take a decision accordingly.
      What about interchangeability being permitted from NFB to FB or FB to NFB for businesses?
      The interest applied on the Fund Based portion of Interchangeability availed during the said period of 1st March to 31st May 2020 will be eligible for moratorium. In respect of new sanctions accorded from 1st March and availed during the period, the interest applied on the Fund based portion would be eligible.
      In what other ways, businesses have been given relief
      The businesses may request the Bank to re-assess their Working Capital requirements on account of disruption of their cash flows or elongation of Working Capital Cycle. They may also request for reduction in margin on NFB facilities (LCs/ BGs etc) or also relief in Security. Decision will be taken by the Bank branches on case-to-case basis based on the genuineness of the request.
      Are NBFCs/MFIs/HFCs eligible under the” Easing of Working Capital Financing”?
      At present, they are not being considered under the Scheme. However, RBI has made provision for sufficient liquidity support to these Financial Intermediaries under recently introduced Targeted Longer-term Refinancing Operations i.e. TLTRO. Liquidity availed under the scheme by Banks has to be deployed in investment grade corporate bonds, commercial paper, and non-convertible debentures over and above the outstanding level of their investments in these bonds as on March 27, 2020. Banks shall be required to acquire up to fifty per cent of their incremental holdings of eligible instruments from primary market issuances and the remaining fifty per cent from the secondary market, including from mutual funds and non-banking finance companies. Investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of 25 per cent of total investment permitted to be included in the HTM portfolio. Exposures under this facility will also not be reckoned under the large exposure framework. Banks will be able to support NBFCs/ MFIs/ HFCs etc. under this window and we donot foresee liquidity squeeze for these Financial Intermediaries.
      Will all these measures of RBI be treated as “restructuring”? What about the provisions applicable?
      The measures stipulated by RBI under the March 27, 2020 circular on COVID 19 Regulatory Package will not be treated as “Restructuring” and hence will not result in asset classification downgrade. Accordingly, the enhanced provisions for Restructured Accounts will not apply.
      What about instalments/EMIs being recovered through SI/ECS/NACH? What will be the procedure for refund of the instalment/EMIs, if demanded by the Borrower?
      Please get in touch with your bank for the revised mandate

  • RBI 3 Months Moratorium on Loan EMI

    Advantages Of RBI Moratorium On Loans

    Instead of the ongoing COVID-19 pandemic that has gripped the whole country, forcing it to go into a complete lockdown, one can only but reflect on the financial impact this will have on his/her household not limited to paying back loans, amidst all the tensions that have arisen due to this absolute halt. However, the Reserve Bank of India has asked banks to do their part in making this difficult situation a bit more manageable. As a result of the culmination of the recent meeting, RBI has instructed banks and credit card companies to relax their loan recoveries for three months, initiating a moratorium, a term we come across ever so rarely, and hence showing its interests towards the country’s economy that has been affected due to this pandemic.

    What is RBI’s moratorium on EMIs?

    Because the entire country is on lockdown in an attempt to eradicate the COVID-19 pandemic that has had a significant impact on the country’s economy, it is safe to assume that every individual, on a personal level, has suffered financially. To relieve borrowers from the unfortunate grips of defaulted payments that will eventually lead to bad credit scores, and not to mention the corpus of debt that will ultimately accumulate, the RBI has rolled out a moratorium and has asked banks to halt recovery processes for three months. The moratorium, according to the dictionary, is a legal authorization to debtors to postpone payments. What this means is that borrowers now need not worry about their EMIs (Equated Monthly Instalment) from March 31 to June 1.

    Understanding the Moratorium

    As is the misconception that this ruling allows borrowers to knock three months off of their loan term, hence, in effect, deducting this amount accumulated from their total payable, let us break the myth. Although it does allow for a scope of not paying for the next three months, it is simply a deferment of payments and not a deduction of the term. What this means is that the loan has been paused. Once you start paying your EMIs after the three-month moratorium, the accrued and accumulated interest is also to be factored into your payments.

    Some salient features of this ruling are as follows:

      The moratorium has been implemented for three months viz. March-April, April-May, May-June.
      The ruling shall act as a deferment, and the term shall continue to post the moratorium mandate.
      No interest will be charged from borrowers in this duration. (it, however, will be accrued and is payable at the culmination of the moratorium)
      Credit scores will not be affected during the period the moratorium is in effect.
      However, it is of utmost importance that one understands that this is not a mandate and is up to your bank to decide if you qualify for this relaxation, and, so to speak if it is necessary. But what kind of loans does this moratorium relate to?

      In line with the RBI circular, the moratorium allows for the following loans to qualify for the relaxation.

        Vehicle loans.
        Personal loans
        Home loans
        Agricultural loans
        Crop loans
        Miscellaneous loans on personal uses like consumer durables loans and education loans.
        The circular also specifies that this is applicable to credit card payments as well. As we now know that interest will not be charged either, this sums up the moratorium in two or fewer sentences as applicable to both the interest and the principle payable amount, in effect applicable to your entire EMI amount.

        Should this relaxation be utilized?

        There are two perspectives of looking at this. Here are some points that might help you decide if this is the only way out for you.

          Because this moratorium applies not only to banks but also to NBFCs (Non-Banking Financial Company), this feature will be the best option for you if you fall prey to one or more of the following situations.
          If you are unemployed and have financial obligations that cannot be ignored, this is a vast yes please scenario.
          If you see signs of layoffs in the future, this moratorium will help you save up some amount until you are able to find another source of income.
          However, it is essential to understand that the interest is accrued and accumulated, which is payable after the moratorium ceases to exist, which will add to your financial burdens. Hence, if you are in a position to pay your EMIs and Credit card bills, do it and do not wait for your bank to offer you the moratorium option. This benefit is only to be used in extreme cases where you risk liquidity, especially if you are used to steady cash flow in the form of salaries.

          In closing, we suggest you stick to your payment schedules and continue paying your EMIs and not risk the accruement of an aggregate interest at the end of this moratorium, hence affecting your financial planning. Take this offer up ONLY, and if ONLY, you are on the verge of liquidity and are in a terrible situation.

          RBI 3 Months Moratorium on Loan EMI FAQs:

          1. What is the moratorium, and can I avail it?

          The RBI moratorium on EMIs is a facility the RBI has offered as a solution to the ongoing economic crisis as an onset of the COVID-19 forced lockdown. The moratorium offers an option where borrowers can defer their payments for three months. Yes, one can avail of it. However, it is up to your bank. The RBI has offered this as a solution alone. But it is up to the decision of banks, NBFCs, small loan banks, etc. if this is necessary after estimating their goals.

          2. Will the term be extended if I choose to opt for the moratorium?

          Unfortunately, no. The interest generated during this period, along with the accumulated pending principal payments, will be recovered as lump-sum amounts.

          3. Do I have to pay for these three months of missed payments later?

          Yes. At the culmination of this moratorium, the interest is accrued, and the principal amount accumulated, which is to be repaid as a one-time payment. Although, this is yet to be officially rolled out as a mandated rule.

          4. Will I be charged interest during this period?

          Yes. Although you won’t be charged during the period, the accrued interest generated for this duration is to be paid along with your accumulated principal amount in full once the moratorium loses effect.

          5. Will this affect my credit score?

          NO. The deferent advises against a mark-down in CIBIL scores.

          6. Does the moratorium also apply to credit cards?

          Yes. Although it is yet to be clarified, the deferment also includes credit card repayments without any effect on your credit scores.

          7. What will be the rate of interest charged for me during this period?

          There will be no change in the rate of interest your lender has been charging you.

  • Banks have very promptly reduced interest rates on fixed deposits, however, loans continue to be recovered at the pre-covid rates of over 8%. The EMI deferment is a mere eyewash
  • 5 things to know about 3-month EMI moratorium offer by RBI

    The three-month EMI moratorium offered by the Reserve Bank of India includes all term loans like home loans, personal loans, credit card dues etc.

    Last Updated: Apr 13, 2020, 11.47 AM IST
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    This deferment will not result in negative impact on credit score for individuals or credit downgrade or default for corporates.

    1. Three months moratorium on loans by RBI means that borrowers can skip their monthly instalments which are due from 1 March 2020 to 31 May 2020.

    2. It includes all loans including home loan, personal loans, education loan, auto loan, working capital loan, credit card dues etc.

    3. Interest is not waived off and will continue to accrue on the outstanding amount.

    4. Borrower will have to pay additional interest for three months by either increasing the amount per instalment or number of instalments.

    5. This deferment will not result in negative impact on credit score for individuals or credit downgrade or default for corporates.