RBI has permitted all financial institutions across the country to grant a three-month moratorium on the payment of EMIs between March and May. The decision is expected to help millions of borrowers who are facing financial difficulties, owing to the coronavirus lockdown. Read on to learn more about the move.
COVID-19 Effect: The Truth behind No EMI for Next 3 Months
The on-going COVID-19 pandemic has completely changed the dynamics of the world. Nearly half of the global population is currently under lockdown, which has hampered the economy drastically. The outbreak has completely disturbed the production and supply chain. Resultantly, the International Monetary Fund has declared worldwide inflation.
India, having more than 1.3 billion population, is also facing the heat of the pandemic. Initially, the country declared a 21-day nationwide lockdown but later extended it till April 30. As a result, businesses have been taking a significant hit. They are struggling to pay not only wages but also their loan EMIs. To address the issue, RBI (Reserve Bank of India) has asked financial institutions/lenders to offer a three-month moratorium on the payment of EMI installments between March and May.
Here is a fairly comprehensive explanation behind this decision, and how you can use the Moratorium EMI Calculator to your benefit.
What Loans are included in the Recent Moratorium?
According to RBI’s guidelines, all financial institutions nationwide are permitted to put EMIs on hold for three months, March, April, and May. The RBI Moratorium includes all significant loans, such as personal loans, home loans, vehicle loans, agricultural term loans, retail loans, corporate loans, business loans, etc. It includes credit card dues as well. As per the guidelines, the moratorium will not affect the credit report of the borrowers.
How will the delay affect the Loan Interest?
The moratorium is nothing but a delay in loan repayment, not a waiver. As a result, those who have taken a loan are not required to pay the respective EMIs for these three months, and they will not be charged with any penalty amount. However, the borrower needs to request his/her respective financial institute or lender and show that the coronavirus pandemic has affected his/her income. Unless you receive the approval of your financial institute or lender, your EMIs will continue to be deducted.
The moratorium, by no means, is a concession as it is only meant to provide some relief during this difficult time. Therefore, the loan repayment period will simply shift forward by three months. Besides, the delay is not going to affect the initially-agreed terms and conditions of the loan.
How will the moratorium benefit the Borrowers?
RBI predicts that the recent decision will help millions of borrowers across the country. As the pandemic has impacted global markets, most businesses are experiencing a tough time coping. They aren’t generating enough profit to pay for their EMIs. Here, the moratorium is expected to provide them with temporary financial relief. However, once the regular service resumes, they are expected to pay their EMIs as they did previously.
Meanwhile, the RBI Moratorium will benefit many salaried people as well. Salaried individuals, who are working with any government or private organization, fear job losses, salary cuts, and delayed appraisals. Therefore, the moratorium will definitely help them during the lockdown period. Besides, the delay is not going to affect their credit history, which is a plus point.
How will the EMI Delay Benefit the Government?
The moratorium is going to help both the central as well as state government immensely. The Indian economic model is based on domestic consumption. The recent RBI guideline will help to maintain the liquidity in the market. As a result, people will have sufficient capital to buy goods and services, which will directly boost the production amount. The increase in the production number will generate job opportunities for the people in the country.
But there is a catch.
Though you will not be subjected to any penalty, you will have to pay the interest amount for the three months later. It will be added in your total amount, and you will have to pay it through EMIs. Thus, it’s the perfect time to use the Moratorium EMI Calculator and act accordingly.
As you can see, despite the three-month moratorium, you will have to pay the interest for the delayed period. As such, the wise thing to do here is clear your EMIs as usual if you have a sufficient amount of funds in your account. This will help you avoid unnecessary financial issues in the long run.