After the Coronavirus outbreak and its impact on the livelihood of millions of individuals – both salaried and self-employed – the Reserve Bank of India’s announcement has given significant relief to the term loan borrowers. All commercial banks, including housing finance companies, have been allowed to provide a moratorium of 3 months on the monthly installments in respect of all term loans outstanding as on March 1, 2020.
To ease the pressure of EMIs on retail loan borrowers as the country fights the deadly COVID-19, Reserve of Bank (RBI) cut repo rates by 75 basis points and allowed lending institutions to provide a three-month moratorium on EMI repayment on all term loans.
This means that no penal action will be taken against borrowers of home loans, personal loans, car loans, credit card EMIs, among others, for not repaying EMIs for three months for the period March to May.
The 3-month loan moratorium will come as a significant relief for borrowers who might have been struggling with their repayments in these times of extraordinary economic challenges and uncertain financial future. Moratorium period, also known as EMI holiday, is the time during which an individual does not have to pay an EMI on loan taken. These breaks are offered to help individuals facing temporary financial difficulties to plan their finances better.
The Reserve Bank of India permitted banks, NBFCs (including housing finance companies), and other financial institutions to allow a three-month moratorium on payment of installments on term loans in view of the disruption caused by the coronavirus outbreak. Deferment will not impact the credit history of the borrower.
The rescheduling of payments will not qualify as a default for the purposes of supervisory reporting and reporting to Credit Information Companies (CICs) by the lending institutions. CICs shall ensure that the actions taken by lending institutions pursuant to the above announcements do not adversely impact the credit history of the beneficiaries.