Should You Opt for RBI’s Moratorium or Not – Check with EMI Moratorium Calculator

The Reserve Bank of India (RBI) on March 27 suggested all banks, housing finance companies, and other lending institutions to provide their borrowers a moratorium period of 3 months on term loans. This moratorium is for payment of EMIs falling due between 01.03.2020 and 31.05.2020. According to the RBI’s announcement, the deferred instalments under this moratorium will include the following payments, falling due from 01.03.2020 and 31.05.2020:

• Principal and/or interest components
• Bullet repayments
• Equated monthly instalments (EMIs)
• Credit card dues

RBI allowed this moratorium to help millions of people in the country with bank dues during the novel coronavirus pandemic. However, it did not order banks to provide such a relief. In fact, it gave the banks an option to take a call on whether they can extend the measure for customers.

In simple words, banks are not obligated to accept the RBI’s suggestion and can opt to avoid it on the basis of financial health.

Some of the leading banks, such as SBI, HDFC, PNB,etc., have announced that they will honour RBI’s request. However, the customers must be aware of the fact that it is a moratorium and not a waiver. Opting for moratorium willingly can make your loan costlier for you.

Banks that are offering a 3-month moratorium will shift the repayment schedule and residual tenure of such loans by 3 months after the moratorium period is over. The interest will continue to accrue on the outstanding part of the term loans during the moratorium period.

If you avoid paying EMIs on dues, then lenders will calculate your interest on a higher amount every month.For high-ticket loans, such as home loans or vehicle loans, not paying EMIs for the next 3 months can increase the interest amount you pay significantly.

Also, if you own a credit card, clear your credit card dues before the due date, despite the moratorium option by RBI as credit cards usually charge a higher interest rate than other lending options. Late payments of credit cardscan significantly increase dues as they will get added directly to your bill.

You should not opt for the moratorium relief measure unless you absolutely need it. You should continue paying your credit card, EMI, and retail loan instalments if you are not financially strained by ongoing COVID-19 lockdown.

For better understanding, you can use Free EMI Moratorium Calculator to know how not paying off your EMIs during moratorium will impact you financially.

Here are examples of home loan and personal loan:

EMI Moratorium on Home Loan

• Loan amount: Rs. 50 Lakhs
• Tenure: 30 years
• Rate of interest: 8%
• EMI: Rs. 7,338
• Month when moratorium starts: 20 months

Difference