What Is Bank Moratorium

Recently in a press conference, RBI governor Shaktikanta Das announced  an extension of the moratorium on loan EMIs by three months, i.e. August 31, 2020 as the earlier three month moratorium period on EMI is set to end on 31st May 2020. Now, before we move further we need to understand first that What is Moratarium? In this article, we will be discussing everything related to this topic to give you a better understanding of the recent announcement made by the RBI Governor.

What Does Bank Moratorium On Loan Means?

Moratorium simply refers to a period  during which the customer is exempted from paying the  EMI on the loan taken. This period is also refer as EMI holiday. These breaks are taken in order to help an individual facing a temprory financial crisis to plan their finances better.

Why Bank Moratorium on loan is extended?

Currently, India is facing a financial crisis due to the ongoing pandemic. Whole nation is under lockodown thus limiting the earning of an individual of the nation. In order to help them financially, this moratorium period has been introduced for August 31st 2020 so that they don’t have to bear the extra burden of paying the EMI in such a financial crisis. The extension period will act as a  relief to many individuals, especially those who are self-employed, as they would have found it difficult to service their loans such as car loans, home loans etc. in such adverse condition when they have loss of income. There credit score will not be hamper as per the guidelines because missing an EMI payment would mean risking adverse action by banks.

Guidelines

The guidelines of the extended moratorium period remain the same as the earlier one which are given below:

1. This move will cover borrowers of home loans, auto loans, education loans, agricultural term loans, retail, and crop loans to their names and credit card dues will also be cover. This moratorium as per the guidelines will be applicable for all loans outstanding as of 1st March 2020, taken from any financial institution in India.
2. “All commercial banks which include regional rural banks, small finance banks, and local area banks, as well as co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions), will be directed to permit to a moratorium of three months on payment of installments in respect of all term loans outstanding as on March 1, 2020.” But interest will continue to accrue on the outstanding portion of the loans during this period and the same should not be treated as waiver.
3. Installements of Principal and Interest components, bullet repayments, Equated Monthly Installments, Credit Card Dues will be included falling due from March 1, 2020, to August 31st, 2020.
4. This is no way should be considered as a concession or loan waiver.

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Statistics of Loan Outstanding 

Given below is the data of outstanding loan as of January end 2020,

• Over Rs 13 lakh crore of housing loans.
• Around 2 lakh crore of auto loans.
• Other sectors like industry, services, agriculture, and Personal loans were Rs 89 lakh crore. 

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Frequently Asked questions:

Q. Who all qualifies for this Moratorium?

Ans. All those Borrowers who have taken loan from any Financial institution in India and have their due till March 2020, are eligible for this moratorium.

Q. What types of loans are covered under this announcement of moratorium?

Ans. This announcement covers all kind of loans wheather Term loan or working capital loans will be covered under this announcement.

Q. For how many months will this moratorium be applicable?

Ans. This moratorium will be applicable till 31 August 2020.

Q. Can this be considered as a loan waiver?

Ans. This in no way should be considered as a loan waiver. It is clearly mentioned in the official press release that this moratorium in no way will hamper the terms and conditions on which the loan was taken but it is a loan extension given due to coronavirus outbreak.