New Delhi: The Reserve Bank of India (RBI) in a press conference on March 27 announced a moratorium of three months on term loans.
Simply put, individuals’ EMI repayments on term loans and interest on working capital would not be deducted from the bank accounts. RBI governor Shaktikanta Das said, “Moratorium on term loans, all commercial, regional rural, non-bank financial companies (NBFCs) and small finance banks are being permitted to allow a three-month moratorium on payment of installments in respect of all term loans outstanding on 31 March, 2020.”
The loan EMI payments will restart only once the time period expire without having any impact on the credit score.
A moratorium 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 COVID-19 and the economic havoc wreaked by the lock down imposed to control its spread.
The announcement comes as a big relief for all EMI payers. The decision comes following requests from various stake holders to defer the EMI payments as the country is going through a 21-day lockdown due to spread of COVID-19.
Meanwhile, the Reserve Bank has also asked depositors not to resort to panic withdrawal.
“I urge those with deposits in private banks to not indulge in panic withdrawal. The macros stronger than what it was post the financial crisis, the fiiscal deficit and CAD is much lower and inflation conditions are benign. I remain optimistic despite current challenges. COVID-19 is upon us but this to shall pass,” the governor added.
In its measures to counter the coronavirus lockdown, the RBI governor announced slashing of 75 basis points in the key repo rate to 4.4%, to revive economic growth. The RBI governor said all the measures announced will result in total liquidity injection of Rs 3.74 lakh crore into the system.