RBI's EMI Moratorium: An Insight

The RBI today allowed banks to offer a moratorium on all term loans. The step was taken in light of the COVID-19 outbreak and the subsequent lockdown. The Reserve Bank of India (RBI) allowed all financial institutions to allow a three-month moratorium for all term loans in light of the COVID-19 outbreak and the subsequent lockdown. In effect, banks can allow all customers to not pay their monthly EMIs for a 3-month period, and the non-repayment will not hurt their credit score.

After the announcement made by RBI on the relaxation of EMI moratorium people had several questions about how the announcement is going to affect their EMI payments. This article aims to clear the clouds on the same.

THE FOLLOWING ARE THE QUESTIONS ANSWERED:

SR. NO.	QUESTION	ANSWER
1	My EMI is due soon. Will the payment not be deducted from my account?	The RBI has said it has only allowed banks to extend a moratorium - and further guidelines are awaited on whether banks will have to separately approve the suspension of EMIs, either on an individual basis or at the bank level. SBI chief Rajnish Kumar in a conference call said that all EMIs on term loans stand canceled. However, the RBI is expected to provide guidelines on whether all customers' EMI has automatically been deferred or whether individual customers will have to opt-in.
2	Will non-payment result in an impact on my credit score?	No. It will not.
3	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) can extend the moratorium.
4	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.
5	Does this mean that I will have to pay all 3 EMIs at one go in June?	Unlikely, as the RBI's statement suggests the tenor may be shifted. That is: the loan may end 3 months later than was originally slated. However, full clarity will be obtained once the RBI issues guidelines on this.
6	Does the moratorium cover both principal and interest?	Yes. It does. 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.
7	What kind of loans does the moratorium cover?	The RBI policy statement explicitly mentions term loans, which include home loans, personal loans, education loans, auto and any loans which have a fixed tenure. They also include consumer durable loans, such as EMIs on mobiles, fridge, TV, etc.
8	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.
9	Does the moratorium cover loans taken on credit cards?	As of this point, it is unclear whether they will be covered. The RBI's guidelines are expected to provide clarity on this.
10	I have taken a project loan for setting up a factory. Can I not pay my EMI?	The moratorium has been allowed on all loans classified as term loans. To get further clarity on this, you may have to contact your bank.
11	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 a change in terms and conditions of loan agreements and will not result in asset classification downgrade.