Coronavirus | How will the three-month EMI moratorium impact customers?

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The story so far: On March 27, the Reserve Bank of India (RBI) cut interest rates to counter the economic fallout from the coronavirus pandemic. He also announced other relief measures, including allowing banks to grant a three-month moratorium on all term loans.

What is the moratorium on loans, as announced by the Reserve Bank of India?

Due to the economic disruption caused by the nationwide foreclosure which led to strains in the financial position of borrowers due to inadequate cash flow, the RBI cleared banks and financial institutions such as the housing finance companies to put a three-month moratorium and may – on the repayment of term loans. A mortgage, a personal loan, a mortgage, a car loan are classified as term loans. So a customer can choose not to pay the monthly installments for those months. The facility is also applicable for credit card contributions. Opting for the moratorium is not mandatory for borrowers who can continue to pay their assimilated monthly payments (IME).

Read also | Lenders ready with an offer for EMI holidays

Will taking advantage of the moratorium have an impact on the borrower’s credit rating?

No, this will not impact the credit rating since banks will not be allowed to classify the loan as a non-performing asset (NPA). Banks will not be able to report any defaults on this account to the credit bureaus.

Will that mean IMEs will be removed for three months?

No, IMEs are not canceled, the amount must be paid later, after the moratorium is lifted. The interest accumulated during these three months will be added to the principal. Due to the non-payment of the IME for three months, the duration of the residual IMEs will increase. Alternatively, clients can choose to increase the amount of the EMI while keeping the money order intact.

What is the charge for the customer who chooses not to pay for three months?

The burden will be higher if a customer is at the start of the loan cycle since the principal overdue is higher and vice versa. (See the table)

image / svg + xmlSCENARIO 1: At the start of the loan term Current future (unbilled) the principal amount Rs.40,00,000 Tenor / EMI remaining 240 Current return on investment 9.00% Number of months of Moratorium 3 Current EMP Rs. 35,989 Interest accrued during moratorium to be In capital letters 90,000 rupees New exceptional 40,90,000 A: The tenor does not change New NDE if the tenor does it not change Rs. 36,799 Increase in EMP Rs. 810 % increase in EMP 2.25% B: EMI does not change New tenor if EMI does it not change 256 Increase of the remainder tenor (month) 16 SCENARIO 2: Middle of loan term Current future (unbilled) the principal amount Rs.20,00,000 Tenor / EMI remaining 60 Current return on investment 9.00% Number of months of Moratorium 3 Current EMP Rs. 41,517 Interest accrued during moratorium to be In capital letters Rs. 45,000 New exceptional Rs.20,45,000 A: The tenor does not change New NDE if the tenor does it not change Rs. 42,451 Increase in EMP 934 rupees % increase in EMI 2.25% B: EMI does not change New tenor if EMI does it not change 61.71 Increase in the remainder tenor (month) 1.71

How to ask for a moratorium on loans?

Different bank / non-bank financial companies offered different ways to apply. Some lenders have a link on their website to request the moratorium while others have asked customers to send an email to a particular address. Some banks also accept physical copies of the application at their branches. It is best to visit the lender’s website to find out how to apply.

Can a bank or a lender decide to whom to offer the moratorium?

No, the banks do not have the discretion. Banks must offer respite to any customer who wishes to opt for the moratorium.

What if the March IME was already paid?

Customers should notify the lender and request cancellation of the EMI. Alternatively, they can opt for a moratorium over the next two months (April and May).

Read also | SBI, HDFC Bank, ICICI activate EMI moratorium option for clients

Can lenders charge a fee or penalty to the customer who opts for the moratorium?

No, they cannot charge a fee or penalty.

What if a debt collector approaches a client during those three months?

The Association of Indian Banks clarified that customers should not get angry with debt collectors or bank staff, but explain to them that they have opted for the extension of the benefit as part of a regulatory package.


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