- What did the RBI announce in respect of outstanding loans
- What kind of loans will be covered for the benefit
- What has RBI announced for businesses?
The Reserve Bank of India (RBI) yesterday 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. What does this mean for you?
Q. What did RBI say? For any kind of ur loan (incl credit cards), ur Bank/NBFC can give you a grace period of 3 mths for ur EMIs/payments i.e. from 1Mar20 to 31May20 What it is NOT a waiver of PRINCIPAL OR INTEREST for 3 mths. It is just a grace period.
Difference b/w Grace Period and WAIVER
Grace Period means that if u cannot pay your EMI/Loan repayment in this period, the bank will
- NOT come after you or charge you PENALTY
- They will NOT call you a defaulter
But For this period,
- normal interest will still be calculated and billed to you (accrued is the word they use for this)
- So this is Grace Period for whatever u were supposed to pay.
- Your tenor of loan will increase by 3 mths (approx) and you will not bear any PENALTY
Q. What kind of loans does the moratorium cover?
The RBI policy statement explicitly mentions term loans, including agriculture term loans and crop loans besides retail loans.
Retail loans are typically home loans, personal loans, education loans, auto and any loans that have a fixed tenure. They also include consumer durable loans, such as EMIs on mobiles, fridge, TV etc.
Credit card dues are also covered.
Q: I have taken a project loan for setting up a factory. Can I not pay my EMI?
A: The RBI guidelines specifically mention retail loans. So a business loan is unlikely to qualify.
Q: What has the RBI announced for businesses?
A: 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 change in terms and conditions of loan agreements and will not result in asset classification downgrade.