What Does 3-Month EMI Moratorium on Repayment Mean as Announced by RBI?

, What Does 3-Month EMI Moratorium on Repayment Mean as Announced by RBI?

The Reserve Bank of India (RBI) today in a press conference announced that all banks and NBFCs have been permitted to allow a moratorium of 3 months on repayment of term loans outstanding on March 1, 2020.

The 3-month EMI moratorium on repayment of loans by borrowers means that they would not have to pay the loan EMI installments during the moratorium period.

Going by the RBI statement, availing such a moratorium would also not lead to a downgrading of the borrower’s credit rating or affect the risk classification of the loan. Further, availing the moratorium will not entail any financial penalties or an increase in the interest rate or charges beyond the existing terms and conditions of the loan.

Under normal circumstances, if the loan repayment is deferred then the borrower’s credit history and risk classification of the loan can be adversely impacted. However, in the case of this moratorium, the borrower’s credit rating will not be impacted in any way, as per the RBI statement.

The RBI in its statement said,

“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) (“lending institutions”) are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020.

Accordingly, the repayment schedule and all subsequent due dates, , as also the tenor for such loans, may be shifted across the board by three months. “


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