Do I need to take advantage of RBI 3 month extended moratorium on loan EMI till August, 2020?

Do I need to take advantage of RBI 3 month extended moratorium on loan EMI till August, 2020Do I need to take advantage of RBI 3 month extended moratorium on loan EMI till August, 2020?

RBI has announced now that is has extended 3 months moratorium on loan EMIs provided earlier now till August, 2020. Many individuals realized very late and would have felt that they have not utilized the loan EMI moratorium announced earlier last week in March. Due to covid-19 many individuals have shut down their offices, would not have opened their business, some lost jobs, some employees there is a delay in getting salaries. Hence, they were unable to pay their loan EMIs. Should you take advantage of RBI 3 months extended moratorium on loan EMI till August, 2020? If you have availed earlier, should you continue to avail for 3 more months?

Also Read: 6 Ways to reduce your Home Loan EMI

What is RBI 3 month moratorium on Loan EMIs all about?

India has been under lockdown due to corona virus situation for 2 months now. Many of us might not be able to pay our outstanding loan EMIs in the last 3 months and also for coming 2-3 months as the situation is yet to settle down. Considering this crisis, RBI has proposed that banks and financial institutions can provide 3 month moratorium on loan EMIs earlier on 27th March, 2020. In simple terms, this is like deferment of EMI payments where you need not pay your monthly installments for next 3 months. People call this as EMI Holiday.

However, they have provided this relaxation from March 1st to 31st May, 2020. By the time it was announced, 1 month already gone. Whoever wanted to avail this, they have availed for the balance 2 month period in reality.

What is the RBI 3 months extended moratorium on Loan EMIs now?

RBI in its review meeting has indicated that earlier, it has announced this loan EMI relief till 31st May, 2020 and this is now extended for another 3 months i.e. till 31st August, 2020. Means you need not pay your Loan EMIs till 31st August, 2020 if your bank or financial institution agrees on this.

What loans are covered for RBI 3 month moratorium on Loan EMIs?

RBI indicated that term loans which include personal loans, home loans, auto loans (Car loans, two wheeler loans, etc.), education loans  and loans taken for purchasing consumer durables like ACs, fridge, mobile phones will be covered under this 3 month moratorium.

Frequently Asked Questions (FAQs)

Now let us look at some of the frequently asked questions about this loan EMI relief extension till 31st August, 2020.

Which bank and financial institution is eligible to provide this 3 month extension relief?

RBI indicated that all commercial banks, which includes regional, rural banks, small finance banks, co-operative banks and all NBFCs which includes housing finance companies and micro finance enterprises can provide this extended relief for 3 more months to their customers.

What loans are eligible for this 3 month additional deferment of loan EMIs?

Specified loans that are taken on or prior to 1st March, 2020 are eligible for this deferment for the period of 3 months more. Earlier it was applicable from 1st March to 31st May, 2020 and now it is extended to 31st August, 2020.

How do I know whether I am eligible for 3 month loan deferment?

RBI proposed this relief, however it is at the discretion of the bank or financial institution to provide a moratorium to its customers. The majority of the banks have already announced they are providing this relief. Now they need to communicate that they are providing the extension relief too.

If my bank provides 3 months extended relief, am I automatically covered?

No. You are not automatically covered by this extension of relief. Most of the banks have already indicated that they are providing the 3 months relief. Second, they would communicate with you about this extension now. Ideally, they should take your confirmation for the extension of relief as some might not want to opt this extension of EMI holiday. Third, you need to accept if you want this 3 month moratorium extension relief. Fourth they would confirm once they accept your proposal. We would update this section once we hear from major banks on how they would proceed with the process.

If I opt for a 3 month moratorium extension, would it affect my Cibil Score?

No. RBI indicated clearly that due to this deferment, no credit score would get affected.

Would there be any interest charged for this additional 3 months EMI relief?

If you opted EMI relief earlier and wanted to extend for 3 more months or opting now for 3 months loan EMI deferment, your bank or financial institution WOULD charge interest for this 3 or 6 month period on the outstanding loan amount. Many banks indicated that they would extend the tenure of the loan to the extent of relief. If you have extended for 3 months, loan payment tenure would be extended for 3 months. If you have extended earlier and extending this further for another 3 months, then total 6 month loan tenure would be extended with revised EMI schedule (Outstanding + interest for the moratorium period would be used to recompute the revised EMI)

Do I need to take advantage of RBI 3 month extended moratorium on loan EMI till August, 2020?

We have provided our view earlier and would re-iterated again.

i) If you are salaried employee or the businessman and you are still able to get un-interupted fixed / regular monthly income, then continue to pay your EMIs. EMI Loan relief does not just mean that its EMI holiday, but it also means that you are just postponing your EMIs and this would increase your tenure of the loan along with added interest.

ii) Can you pay your EMI’s with your emergency money or investments without disrupting your existing expenses, then go head pay your EMIs in the normal way.

iii) We are already seeing lockdown for 2 months. If you think that your income is going to be disrupted due to corona virus situation for next 3 months, you should opt for this 3 month extended loan EMI moratorium.

iv) Job cuts on the way. Don’t underestimate lay-off situation in India now. There are millions of job cuts in the last few weeks. If you get an indication that you would lose a job or could sense that you may lose job, opting for this 3 month moratorium can benefit you so that you can join another job or find alternative ways of make extra income. However, you need to pay interest in your future EMIs.

v) While home loan EMIs can be deferred, personal loans or credit card payment deferment should be avoided. Interest on credit card outstanding or on personal loans are generally very high compared home loan. Hence, after this 3 month extended moratorium, you would see high interest to be paid on such loans. Check if you can avoid them.

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Suresh KP

Do I need to take advantage of RBI 3 month extended moratorium on loan EMI till August, 2020

Suresh KP

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