People across the world have been reeling under the tremendous pressure of COVID-19 and Indians are no exception in that. More than the life threat, the financial impact of this global pandemic has been affecting everyone substantially. There are risks of businesses shutting down, people losing jobs, but the government is fighting to keep the financial threat away through various measures.
One initiative is RBI asking all financial institutions to defer the debt EMIs for three months which is called the EMI Moratorium scheme. Below are some of the best highlights of the programme:
- Not a waiver:
The RBI moratorium scheme is by no means, a waiver but a delay of the loan EMIs. The programme states that any loan instalment falling between March 01, 2020, and May 31, 2020, would be eligible for a deferment for three months. In other words, you can defer the loan EMI falling on May 07, 2020, to August 07, 2020. Such a temporary exception is provided to the borrowers who are under the burden of the loans
- Applicable to Banks, NBFCs, HFCs, MFIs:
The RBI has made it particular that all NBFCs, HFCs, MFIs, banks – private, public, rural & co-operative should abide by the moratorium scheme and provide financial relaxation to their customers for the next three months.
Who can Avail?
Both the businesses and individuals can leverage the RBI moratorium scheme for their benefit as the scheme is applicable for term loans, capital loans, home loans, personal loans, vehicle loans and even credit cards. However debentures, bonds would not be available for exemption.
Communication from the financial institution:
Note that the communication from your lending institution is an intimation about the moratorium offer. The offer would clearly state that you have the option to choose the scheme or continue paying your EMIs. In other words, the communication from your lender does not automatically convert into the programme, and you should consult with your bank/NBFC to avail the moratorium.
Interest & Penalties:
As per the scheme, the interest would be accrued during the tenure of three months, but there will be no penalties for the postponement. It would be illegal for the financial institutions to levy penalty charges during the three months of the scheme.
Applicable for standard accounts:
RBI has advised the lending institutions to be flexible with all types of customers who have a loan account. Still, such flexibility is not given to non-standard accounts, i.e. accounts which have a long history of defaulting.
Will not affect the credit rating:
The credit score of an individual or a business will not be affected during the moratorium. Credit rating plays a vital role in the future borrowing of anyone, and hence the scheme is designed not to affect the credit scores by any means. For example, if you wish to avail further loans shortly, your lender will not find any changes in your credit scores as you did not pay the EMIs during the three months of the scheme.
Applicable for credit cards & bullet payments:
As per the moratorium, a business or an individual is qualified for all types of EMIs, instalments, interest portion, credit card dues, principal portion, bullet payments etc. If at all, an individual can meet the essential requirement, he/she can get in touch with their financial institution to opt for the RBI moratorium scheme.
In any case, if a bank/NBFC debits the EMI from your account, they will credit back the amount to your account if the EMI falls between the three months mentioned in the scheme.
Experts advise the borrowers to make use of the benefit only if you are unable to contribute to the EMI for the three months as the scheme is only a delay and not a waiver. You would be still paying the EMIs after the three months, and hence you should decide what is best for your financial stability.
The moratorium scheme is an excellent move by the government for the benefit of the borrowers who will face difficulty during the lockdown. One can use the Moratorium EMI Calculator to know the estimated value of EMI. Hence, you can opt for the moratorium based on your financial condition and the projection for the foreseeable future so that you can manage your finances well.