Here comes an important update from the Reserve Bank of India (RBI).
Amid the weak economic activity in the wake of COVID-19, the Central Bank directed all banks, NBFCs, small finance corporations and other financial institutions to allow a moratorium of three months on EMI repayment of all term loans.
“All commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all -India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) (“lending institutions”) are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020.
…Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, may be shifted across the board by three months,” RBI said in an official release.
This means all aforementioned banks and related institutions will not deduct EMI from individuals’ bank accounts till the end of the moratorium period.
“The moratorium/deferment is being provide specifically to enable the borrowers to tide over the economic fallout from COVID-19. Hence, the same will not be treated as change in terms and conditions of loan agreements due to financial difficulty of the borrowers and, consequently, will not result in asset classification downgrade. The lending institutions may accordingly put in place a Board approved policy in this regard,” says the Central Bank Governor.
Speaking on this, the BankBazaar.com CEO Adhil Shetty said the non-payment during this period will not impact the credit scores and will not apply to credit card dues.
“Non-payment of loan EMIs during the moratorium will not impact your credit score, as mentioned by the RBI governor. As such, you should stay on top of it by checking your credit score regularly during the moratorium period. Also, the moratorium doesn’t apply to credit card dues. So, clear your card dues in full on time to avoid any impact on your credit score,“ says Shetty.
This decision by the Central Bank was taken in response to the Finance Ministry’s letter sent after the stakeholders urged the Ministry to do so in the wake of COVID-19 pressure.
This decision is expected to offer some relief to the individuals, especially the self-employed.
The RBI also issued directives to identify any default payments within 30 days and consider them as ‘special mention accounts’.
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