The Reserve Bank of India has announced that all commercial banks, co-operative banks, all-India Financial Institutions, and NBFCs are permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020. This may have led to a spate of questions from borrowers. Borrowers ask if personal loans are covered? Borrowers ask if this is an interest waiver? RupeeIQ has compiled a set of frequently asked questions and answers on this debated topic. Read on to know.

What is moratorium?

A moratorium period refers to a particular period of a loan tenure during which the borrower does not have to repay anything (principal or interest). In our case, it means borrowers will not pay loan EMI instalments for three months. Not paying for the moratorium period will not impact credit history and credit score.

Does moratorium mean my EMIs will be waived for 3 months?

This is not a waiver. You will be required to pay the EMIs as the moratorium ends, along with regular EMIs.

Do note customers may be required to pay additional interest of three months on their current outstanding loan amount. How or whether the customers will have to pay this extra interest is something that needs to be clarified by lenders.

Does today’s announcement means no EMIs for home loan/ personal loan etc?

This will be for term loans, which includes home loans, personal loans, education loans, auto and any loan that has a fixed tenure. If your lender agrees to accept, then yes: No EMIs for three months.

Do remember that the moratorium has to be likely requested by the borrower from the lender. Lenders won’t grant blanket moratorium for all is our understanding. You should speak to your lender about specifics.

What will happen to auto debit EMIs if moratorium is approved for a borrower?

You may still be required to request for cancellation of auto debit for three months. Wait for your lender to announce the details.

Do I need to show my income is impacted due to coronavirus triggered slowdown?

Our understanding is that the borrower will have to request the bank for moratorium and show that his or her income has been affected. Only a few banks may go for outright moratorium for all term loan instalments.

Which lenders can offer moratorium to borrowers?

All commercial banks including regional rural banks, small finance banks and local area banks can offer. All co-operative banks can offer. All-India Financial Institutions, and NBFCs including housing finance companies and micro-finance institutions can offer.

Does the moratorium cover credit card payments?

Even though credit cards are not term loans, they are covered under this moratorium. As per RBI note, credit card payments is included.

I can afford to pay all EMIs. Should I take benefit of moratorium if I get it?

We will advise you to pay all EMIs that you can afford. Just because a moratorium is available, it doesn’t mean you should take it. This is merely a deferment, not a waiver.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at [email protected].

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