As we know due to COVID-19 economy of whole world is badly affected and same is the case with India. Country is under lock down and almost all units & business are closed. In this situation there is one big question among the borrowers of bank that How will they make payment of their EMI falling due on March 2020 (As country is under lock down from 25th March 2020) ?
This situation is not hidden from government also, so in order to provide some relief RBI on 27 March 2020 announced COVID-19 Moratorium package. Under this package banks will grant three-month moratoriums to their customer. It means that EMI falling due between March 2020 and May 2020 will come under moratorium. Below is all the necessary information one need to know about this relief package.
What is Moratorium ?
Moratorium period or Holiday EMI . Usually repayment start from the next month after the loan disbursements period is the time between disbursement of loan and start of repayment, but in some schemes bank permits moratorium which gives some extra time to borrower before the actual EMI starts. Moratorium is common in education loan and home loan.
Note : Interest continue to occur during moratorium period.
What is COVID-19 Moratorium Relief package?
The Reserve Bank of India (RBI) has issued COVID-19 – Regulatory Package notification, dated March 27, 2020.
According to the notification, In respect of all term loans (including agricultural term loans, retail and crop loans), all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBF Cs (including housing finance companies) (“lending institutions”) are permitted to grant a moratorium of three months on payment of all installments falling due between March 1, 2020 and May 31, 2020. If the customer opts for this scheme, then the repayment schedule for such loans will be deferred by up to three months. However, interest shall continue to accrue on the outstanding amount of the term loans during the moratorium period.
Note: If EMI is paid in advance or EMI of March 2020 is already paid then no refund of EMI will be granted.
Note: EMI defer is applicable only for the mentioned period, if EMI is already due then one has to pay that EMI. For example, suppose one defaulted in repayment of EMI for the month of February 2020, then he has to make the payment of that EMI otherwise amount is categorized as overdue amount.
Note: Moratorium period should not be confused with debt waiver. Not a single EMI will be waived, it is just deferment of repayment as per circular.
Which installment does the moratorium cover?
The moratorium covers all unpaid principal and interest dues for the month of March 2020 and all principal and interest amounts falling due in the months of April and May 2020.
What if one wants to repay EMI after opting moratorium?
There might be case in which initially customer opted moratorium period but in between he wants to pay his EMI . In this case the repayments will be adjusted against any overdue or considered as advance payment for future dues.
What about penal interest in Moratorium period?
Penal interest is interest on interest or in other words it is a penalty for non-repayment of EMI on time. No penal interest will be charged during Moratorium period.
What if CC/OD limit is about to expire between March 2020 to May 2020 ?
These limit will be extended to May 2020. But customer should be ready with renewal documents so that limit will be reviewed as fast as possible after the moratorium period.
Will interest charge during moratorium is reflects in CIBIL?
NO, However any overdue prior to March 01, 2020, will continue to be reported.
Which type of account are eligible for this COVID-19 Moratorium?
Only standard, regular account are eligible for this moratorium, it will not be treated as concession or change in terms and conditions of loan agreements.
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