3-month relief on EMI repayments and interest on working capital


Shaktikanta Das, Reserve Bank of India Governor announced a three-month moratorium on repayment of term loans and interest on working capital. In India, total cases of COVID-19 rose to 694 on Thursday, including 16 people who died. Globally, the pandemic virus has taken over 18,000 lives and infected over 4 lakh people.


The Central Bank (RBI) has come into action says, all commercial banks (including non-banking financial companies or NBFCs -housing finance companies and micro-finance institutions) and lending institutions are allowed to defer interest on working capital repayments by three months, said Das in a conference.


Moratorium period refers to the period of time during which borrowers do not have to pay an equated monthly instalment or EMI on the loan taken.


It will be applicable on payment of instalments in respect of all term loans outstanding as on March 1, 2020. Accordingly, the repayment schedule and all subsequent due dates, as also the tenure for such loans, maybe shifted across the board by three months.


In respect of working capital facilities sanctioned in the form of cash credit, lending firms are being permitted to allow a deferment of three months on payment of interest in respect of all such facilities outstanding as on March 1, 2020.


The accumulated interest for the period will be paid after the expiry of the deferment period. Banks may also reassess the working capital cycle and will not be treated as non-performing assets, said Das.


The announcement should help as equated monthly instalments or EMI repayments on loans taken will then be not deducted from bank accounts and also not adversely impact the credit score.He further said, that credit card dues won’t be part of the moratorium as it’s not part of term loan.


Several industry experts says, that the RBI’s announcement on deferment of EMI dates is not bold. They said that all EMI due dates must be automatically deferred.


Besides, the RBI cut interest rates by 75 basis points to 4.4% and announced several measures to inject Rs 3.74 lakh crore liquidity into the system.