COVID-19 has struck India in ways that we could never have imagined of. It has led to the mandate nation-wide lockdown. This lockdown has forced many businesses to pause their operations, especially those who do not come under essential services. Thus, while some professionals have maintained the continuity of business by leveraging work from home solutions, other professionals are currently dispossessed of a stable income source.
To deal with this change and the challenges that our economy is facing, Reserve Bank of India (RBI) has come up with a moratorium. Financial entities are instructed to grant a three-month moratorium to all their borrowers on their equated monthly instalments (EMIs). For those borrowers who are facing financial liquidity issue amidst the pandemic, this news is much-needed succour. In this article, we will take a closer look at what does the EMI moratorium entails.
With the EMI moratorium, the RBI has asked banks and leading financial institutions including the NBFCs and MFIs to pause the repayment of instalments due to COVID-19. Some of the types of loans whose repayment is a pause in this moratorium are:
- Home loans,
- Personal loans,
- Car loans,
- Working capital loans
- Agriculture loans.
Additionally, the credit card dues are eligible for the EMI moratorium without any negative impact on the user’s score.
Some of the key announcements of the EMI Moratorium during COVID-19 are:
- All commercial banks, including regional rural banks, small finance banks, local area banks, and co-operative banks are eligible to extend the moratorium. It also extends to all-India financial institutions, and NBFCs (including housing finance companies and micro-financing institutions) to observe this EMI moratorium.
- Apart from this, individual banks have been given the liberty to reframe their policies in favour of their customers. They can also choose to offer relief to their customers, or the select few who have requested for it.
- One of the announcements also mentioned that the delay of the repayment of instalments due to COVID-19 during the EMI moratorium period would not impact the borrower’s credit score.
- This moratorium qualifies the suspension of both – the principal payment and interest for the period between March 1 and May 31.
- The EMI moratorium also covers loans on durable items such as EMIs on mobiles, fridge, TV, etc.
- The central bank has also instructed financial institutions to consider providing the same relief measures for businesses who have opted for working capital loans.
The EMI moratorium is initiated in light of the adverse effects of the pandemic on businesses and individuals. Through this initiative from the RBI financial institutions are expected to extend more support to its customers in every aspect of banking.