The Coronavirus hasn’t spared any state, any nation, and economy from its impact. Days and months passed by. However, the COVID-19 virus continues to display destructive effects on the global economy. In the midst of these stressful times, the RBI has proposed something attractive. Wondering what? It’s the RBI’s 3 months moratorium to ease off the financial load on borrowers.
3 Months Moratorium by RBI: Understand What it is
The RBI Governor, Mr. Shaktikanta Das, introduced this move. Subsequently, most loan recipients in the country have welcomed this. Simply put, this moratorium refers to the RBI’s instruction to all lenders to allow a pause on EMI payment for three months. RBI allows for this temporary exemption on all outstanding term loans as of March 1, 2020. These primarily include home loans, personal loans, and credit card dues.
The move comes in the light of the current deadly virus attack. The virus has weakened the economy largely. With the closure of several businesses, employees are facing a severe financial shortage. Few are laid off. Therefore, anticipating a serious inability on the part of some people to pay their EMIs; the RBI took the decision.
With the introduction of the three months moratorium, those who pay EMI on loans can keep it on hold between the period March 1, 2020, and May 31, 2020.
3 Months Moratorium: Impact on the Borrowers
The suspension truly brings the much-needed relief to most people. However, some aren’t viewing it in the same light. This is because people who choose to avail this RBI emi pause option would have to pay more as interest afterwards. The ROI charged on every EMI would continue to add over 3 months regardless of the facility. This amount would then add up to your overall burden.
Besides that, some borrowers prefer to use the Electronic Clearing Service (ECS) in the first week of a month. Therefore, they would have already paid the EMI due in March 2020. As a result, their EMI amount can only be held back by two months.
Moratorium Guidelines by Banks and Financial Lenders
Most Indian banks have chosen to offer the pause facility to their customers. However, some banks also provide the option to their customers to choose. Customers can decide if they wish to choose to avail the suspension facility.
Some others are making it a default option. They are allowing customers to hold-back their EMI payment for 3 months. The process would work automatically. In case someone doesn’t wish to avail of the offer, they need to opt-out of the facility manually ahead of the deadline.
All commercial banks are allowing the pause. Besides, other lenders like co-operative banks, All-India financial institutions, and NBFCs, including housing companies too are allowing it.
Moratorium Effect on Credit Score
However, under normal circumstances, the non-payment of EMI affects the credit score. The motivating part is, the RBI moratorium on home loan EMI will not crash the credit score of a borrower. Most importantly, any default payment after May 31, 2020, will surely affect your credit score.
Summary
If the pandemic hasn’t severely affected your financial situation, you’d be better to continue paying your EMIs. This is because you’d want to avoid the burden of making higher interest payments at the end of the three months moratorium.
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