Explained!!! What is RBI’s loan moratorium & how it will affect loan borrowers

Due to the ongoing pandemic around the world, RBI has taken measures to lessen the burden on loan borrowers. RBI’s loan moratorium or EMI Moratorium comes with a view to relief loan borrowers amid the nationwide lockdown, thus impacting people’s businesses, pay cuts and job loss.

RBI has allowed banks and other financial institutions to provide a moratorium of another three months to all types of loan borrowers. The first phase of moratorium was till May 31.

RBI on May 22, 2020 permitted banks and other financial institutions to provide a moratorium extension to borrowers by another three months, i.e., from June 1, 2020 to August 31, 2020

RBI has also taken care of keeping your Credit Score unharmed due to non - payment of EMI.  For this, it has instructed lenders to ensure that the credit score of the borrowers does not get impacted due to availing of moratorium. The loan borrowers should not mistake moratorium as an interest waiver. Moratorium basically means you don't have to pay your EMIs for that time period.

Moratorium is provided to companies and individuals who are incurring losses in business due to no or decreased sales, insufficient or no cash, jobs loss or pay cut and other such monetary factors. With an extension in RBI’s loan moratorium, borrowers will get some extra time to collect their money in order to repay.

 As the government is all set for UNLOCK 1.0 which means shops and offices are now permitted to open phase wise. This UNLOCK 1.0 will come as a relief to loan borrowers once businesses and offices start to get back on track.

The loan can be of any type- Home Loan, Business Loan, Car Loan or any other. The borrower needs to simply approach their bank or financial institutions in order to opt for availing moratorium.

Your lender may have communicated the same to you via an email or text message. You just need to follow the given instructions in order to avail.

What options are lenders giving for availing moratorium?

Usually, a lender will provide you with two options:

1. Your EMI remains the same and your tenure increases
2. Your TENURE remains the same, but your EMI increases

You may have to choose from some of the options given in order to avail moratorium benefits.

*Note: The above option is just for reference purpose, might differ from lender to lender

Eg. A borrower has taken a home loan of Rs 50 lakh for 30 years and ROI is at 8.5 %. He is required to pay 360 EMIs, where the EMI amount is Rs 38,446 per month. If he avails moratorium from April to August and has two options to pay the amount. In case these are the first five EMIs considering he being a beginner, the tenure will increase by 95-97 months to 445-457 months approx (if he opts for increasing the tenure). In case he opts to increase EMIs and keep the tenure same, the new EMI he will have to pay is Rs 38,500-39,807 per month approx.

What should you do?

Incase, you are capable of repaying your interest/EMI, you should not opt for a moratorium and pay your dues. By doing this, you save on the interest that Financial Institutions will charge you on opting for a moratorium.  Hence, we advise you to not to take moratorium unless necessary.

If you are a customer of Fedbank and wish to opt for loan moratorium, read here for more information.

If you wish to calculate your EMI and tenure post availing Moratorium, click here.

Alternately, you can also contact us on customercare@fedfina.com, in case of any queries.