No Home Loan, Personal Loan, Corporate Loan EMIs for three Months; Borrowing Rate cut by 75 bps

No Home Loan, Personal Loan, Corporate Loan EMIs for three Months; Borrowing Rate cut by 75 bps

The Reserve Bank of India brings huge relief to borrowers affected by the nationwide lockdown and Coronavirus outbreak.  RBI Governor Shaktikanta Das said after MPC Meet that the central bank has allowed all lenders to provide EMI moratorium of three months on all outstanding Term Loans w.e.f. March 21,2020.

The RBI’s official statement reads as: “All commercial, regional, rural, NBFCs, and small finance banks are being permitted to allow a 3-month moratorium on payment of instalments in respect of all term loan EMIs outstanding on March 31.”

Thus, your scheduled EMI for Home Loan, Personal Loan, Corporate Loan, and Car Loans may not be generated for the next three months. However, the decision will come into effect after your lender’s call.

In this period, neither EMI will be deducted from your bank account for outstanding loan and nor will it hit your credit score. This will come as huge relief to salaried as well as self-employed individuals.

Also, all lenders are allowed to defer interest on working capital repayments for three months. The financial institutions can also reassess the working capital cycle, and the nonfulfilment of limits will not be treated as non-performing assets.

Earlier in the press meet, the RBI governor also announced a significant RBI repo rate cut by 75 basis points. The borrowing rate cut will encourage banks to give more to business rather than deposit it with the central bank. The slew of measures should mitigate the negative effect of COVID-19 on financial services.

 

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The new Repo rate stands at 4.20 percent, and thus new borrowings such as home loan interest rates and Corporate Loan Rates will be calculated based on new benchmark rates. The RBI refrained from sharing any inflation and growth projection numbers amid “uncertain conditions” caused due to pandemic breakout.

Hinting at rising probability for a recession in various economies globally, the RBI Governor said tough times are ahead, but they won’t last, ‘only tough institutions do.’ The Governor assured that the depositors’ money is safe in banks, and customers should not panic or withdraw their money. 

The RBI has also reduced the Cash Reserve Ratio (CRR) of all banks by 100 basis points to 3 % of Net Demand and Time Liabilities for a period of 1 year, w.e.f. the fortnight of 28 March. This will result in liquidity injection of Rs 3.74 lakh crore to the system.

Just a day before, Finance Minister Nirmala Sitharman had announced a Rs 1.7 lakh crore relief package involving direct cash transfers & food security measures for the poor of the country.

MyMoneyMantra welcomes RBI’s decision to ease the financial crunch of borrowers amid the pandemic outbreak. We have curated some FAQs to help individuals and businesses understand the implication of today’s announcements.

FAQs

✅ My EMI is due in the next week. Can I expect that no payment will be deducted from my bank account?

Well, today’s announcement should be seen as RBI’s nod to banks for allowing moratorium or EMI holiday. The final suspension of EMIs will be in effect only after the Individual bank approves the same. As a borrower, you can request your bank for the EMI holiday and show that your income is impacted by the coronavirus disruption. Unless there is approval from the bank, EMIs will still be deducted from your bank account.

✅ For the next three months, my EMIs are waived off or deferred?

The RBI has clearly said that it is a moratorium of EMIs, i.e., a deferment for the next 3 months and not the waiver. The EMI will be paid off later. Your bank will soon announce the details for the same as the RBI has asked banks to make a list of board-approved policies for serving EMI moratorium.

✅ Which types of lenders will offer deferment of EMIs to customers?

As per RBI’s press release circulated after the MPC meet, following lending institutions can offer EMI deferment to their customers:

  • Commercial banks, including all regional rural banks, small finance banks, and local area banks
  • Co-operative banks
  • NBFCs, including all housing finance companies & micro-finance institutions
  • All India Financial Institutions (AIFIs) 

✅ Will the EMI moratorium be applied to both principal and interest component?

Of course, as your bank shares approval for EMI moratorium, the entire EMI, including principal and interest will be deferred for the said time period.

✅ RBI has allowed moratorium cover on which types of loans?

The RBI Governor categorically said the moratorium could be allowed on all term loans. So, your existing home loans, personal loans, education loans, auto, and any loans which have a fixed tenure are eligible for requesting EMI holiday. It may also cover consumer durable loans, such as EMIs on mobiles, fridge, TV, etc, subject to bank’s approval.

✅ Does the moratorium cover credit card payments?

According to RBI Credit Card payments can be deferred as per individual bank’s board norms. 

✅ What is the implication of today’s decision on my business loan? Can I pay my EMI?

The moratorium has been allowed on all term loans. You can choose to continue repaying or request an EMI holiday as per your cash flows.

✅ What type of moratorium is allowed for businesses?

In MPC meet today, the RBI Governor has said all lenders are allowed to offer deferment of interest payments for all working capital loans by businesses. The accumulated interest during this period can be paid out after the EMI holiday period. Furthermore, Mr. Das said that the Moratorium/ deferment is not “change” in Loan terms and conditions and will not result in a downgrade of asset classification.

✅ How will EMI Holiday on my Home Loan affect my CIBIL score?

The EMI moratorium by your bank on your Home Loan repayment will neither be reported in your Credit Information Report nor will it impact your credit history and CIBIL Score, the RBI Governor said in the MPC Meet.

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