Moratorium on term loans is among the measures
The Reserve Bank of India on Friday took a series of measures to minimise the economic impact due to the lockdown caused by COVID-19, which includes moratorium on term loans.
“Moratorium on 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,” the RBI said.
“Accordingly, the repayment schedule and all subsequent due dates, as also the tenure for such loans, may be shifted across the board by three month,” the RBI said.
Terms loans will include retail loans like home and auto loans but credit card dues are not included.
As a result, equated monthly instalment of borrowers are deferred by three months.
Pallab Mohapatra, MD and CEO of Central Bank of India, said since the RBI had clarified that banks do not have to classify these loans are non-performing, there would be no adverse impact on credit score of the borrower.
Interest will continue to accrue on the outstanding during the period, though at a lower rate, since the RBI has reduced repo rate by 75 bps, which the banks will have to pass on to the borrowers.