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

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?

Since credit cards are defined as revolving credit and not term loans, they are not covered under the moratorium.

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.