India / RBI allows banks to offer moratorium on EMI payments for another 3 months

Mumbai: The Reserve Bank of India has extended the moratorium relief for all term loans and working capital loans by another three months, Governor Shaktikanta Das said today. The moratorium relief comes amid an extension in the nationwide lockdown and the resultant loss of economic activity due to the COVID-19 pandemic.

RBI on March 27 had permitted all lending institutions to allow a three-month moratorium relief to their borrowers from March 1, 2020 up to May 31, 2020 to help ease any debt servicing for borrowers impacted due to COVID-19. This has now been further extended by another three months up to August 31, 2020.

This means borrowers who have term loans, including agricultural term loans, retail loans, crop loans can avail an additional three months of moratorium on installments from lending institutions. These installments include principal and/or interest components, bullet repayments, Equated Monthly Installments (EMI) as well as credit card dues.

Borrowers who have working capital facilities sanctioned in the form of cash credit or overdraft can also avail an additional to three months of deferment in interest payment from all lending institutions.

While term loan borrowers were allowed to repay the accumulated interest during the moratorium period at the end of their original loan tenor, borrowers of working capital loans were expected to repay the accumulated interest for the moratorium period immediately after the end of the moratorium.

This criteria has now been relaxed by RBI. Governor Shaktikanta Das today said that instead of repaying the accumulated interest for the six month moratorium period immediately at the end of the moratorium, banks can convert the accumulated interest for this period into a term loan to be repaid over time.

Earlier the RBI MPC decided to reduce the repo rate by 40 basis points to 4 percent from the 4.4 percent earlier. The central bank also cut the reverse repo rate by 40 bps to 3.35 percent.

This is the third presser of the RBI governor on the central bank's measures to address COVID-19 crisis. The press briefing comes after the government gave details of the Rs 20 lakh crore stimulus package.

In his earlier addresses, the RBI governor announced a series of measures to infuse liquidity into the banking system and support the economy after the slump due to the coronavirus outbreak and subsequent nationwide lockdown.