FAQs on RBI’s EMI Moratorium on Loans

Considering disruptions in the economic activity due to COVID-19 outbreak, The Reserve Bank of India (RBI) permitted all banks, small finance banks, NBFCs, Housing Finance Companies, etc. to grant a moratorium of three months on payment of all installments for term loans falling due between 1 March 2020 and 31 May 2020.

It is expected that regular incomes may be disrupted, delayed, or stopped due to the lockdown situation in the country amidst the COVID-19 pandemic. The relaxation has been brought to provide some relief to the borrowers from the burden of loan servicing in the interim.

The FAQs listed below are about RBI’s EMI Moratorium on loans during COVID-19 outbreak:

1. Is this moratorium applicable on all term loans?

Yes, RBI has allowed all financial institutions to grant a moratorium of three months on all types of term loans, including home loans, personal loans, vehicle loans, education loans, etc. irrespective of the segment and the tenor of the term loans.

For example, if the loan was due to end by December 2020, such a moratorium may extend the loan till March 2021.

2. Which loan installments are getting covered in the relaxation allowed by RBI?

Any installments, whether EMIs, principal and/or interest component, bullet repayments, periodic installments, or credit card dues falling due within 1 March 2020 to 31 May 2020 have been allowed to be extended by 90 days.

3. Is the moratorium also allowed for installments due but not paid as of 1 March 2020?

No, as per the current RBI guidelines, only the installments falling due in March, April, and May 2020 are eligible for the moratorium.

If any of the earlier installments are still pending for payment, either fully or partially, the same cannot be deferred and the usual asset classification norms will continue to apply.

4. Will I be required to repay the EMIs due between March to May 2020 at once in June 2020?

No, as per the current relief allowed by RBI, the repayment schedule will be extended by three months. Post the expiry of the moratorium period, the borrower will be required to repay the EMIs as per the schedule only.

5. Will the change in the loan schedule downgrade the loan account as NPA?

The financial institutions are regulated by RBI in respect of the restructuring of loans. In normal circumstances, any restructuring of term loans due to the financial difficulty of the borrower would have resulted in the downgrading of the loan account as Non-Performing Asset (NPA).

However, the specific relief allowed by RBI will enable the banks to restructure the loans without any impact on the status of the loan account. Further, the asset classification of such term loans will be determined based on revised due dates and the revised repayment schedule.

6. Will the moratorium be applied automatically to the loan account?

This moratorium is not automatically applied to all term loans, and the same needs to be allowed by every financial institution as per the Board-approved policy. While some of the institutions are implementing this moratorium to all the borrowers, other institutions are granting it only to the borrowers specifically requesting such relief.

Money View Loans is reaching out to its borrowers through email separately to guide them for the process to be followed by them to opt-in/opt-out of such moratorium.

7.  Will interest be charged on loan during the moratorium period?

Moratorium only amounts to the deferral of the loan installments. The interest will continue to be accrued on the loan amount as per the balances outstanding during the moratorium period.

8. How will the additional interest charged to the loan account during the moratorium period be recovered?

The additional interest can be recovered in two ways

(i) increase in the EMI amount with the balance tenor remaining the same and

(ii) increase in the loan tenor with the original EMI remaining the same.

9. Will this moratorium impact my credit score?

RBI has allowed extending the original repayment schedule by three months. The payments will not be considered due to reporting to Credit Information Companies (CICs).

CICs have also been directed to ensure that such moratorium does not adversely impact the credit history of the beneficiaries. Your decision to opt for the moratorium period will not impact your credit score.

10. If my bank/financial institution grants the moratorium to all the borrowers, can I still repay the EMIs as per the present schedule?

Yes, financial institutions are encouraging the borrowers to repay the loan installments as per the existing repayment schedule in spite of the moratorium being offered in terms of RBI relaxation.

If your cash flows are not impacted by the COVID-19 lockdown, it is advised to continue repaying the loan installments to prevent additional interest expense during the moratorium period.

11. Can I delay paying my credit card dues as per this moratorium?

The relaxation has also been allowed for credit card payments. However, interest will continue to be charged on the outstanding amounts as per the credit card agreement.

The only relief in such cases is in respect of non-levy of penal interest on delayed payment and non-reporting of such dues as overdue to Credit Information Companies, which calculate your credit scores.

12. My installments are being recovered through ECS/NACH mandates. What happens to such mandates in the case of the moratorium?

While the bank/financial institution may extend the moratorium period to your loan accounts, the ECS/NACH mandates may not be canceled automatically by the bank.

In case you wish to avail of the moratorium period, you can request your financial institution to cancel such mandates for three months and activate the same post such moratorium period.

Do let us know if you have any other questions regarding the RBI EMI moratorium on loans. For Money View loans, feel free to reach out to our Customer Support team.

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