Vijay C Roy
Tribune press service
Chandigarh, March 30
On Friday, the RBI authorized banks and other financial institutions to grant a three-month moratorium on all term loans. This would benefit customers facing liquidity issues and likely to encounter problems repaying their monthly installments equivalent (EMI).
However, there is confusion among people as to how to avail this benefit, what interest applies during the moratorium period and how a borrower should go about during the lockdown period when banks have restricted operations. in areas where the curfew has been imposed. When customer questions were presented to bankers, they said they were seeking clarification on the matter.
The Tribune explains what this means for borrowers.
Who will benefit
Borrowers likely to be subject to pay cuts or late payments/layoffs, farmers, traders and businesses facing cash flow problems due to lockdown.
Loans covered by a moratorium
In accordance with the RBI circular, banks and other financial institutions are authorized to grant a three-month moratorium on all term loans, including car loans, home loans, personal loans, agricultural loans as well as agricultural loans. which must be paid between March 1st and May 31st. In addition, credit card charges will also be eligible for the moratorium.
No interest waiver
According to the bankers and the RBI circular, only the loan repayment schedule has been changed and interest for the period will be charged for three months as per the terms and conditions of the respective banks. However, no penalty interest will be charged and borrowers’ credit rating will not be affected due to the moratorium. Under normal circumstances, if loan repayment is delayed, the borrower’s credit history and loan risk classification are affected.
How to do it
Banks still need to get clarification on the implementation part, but it won’t be automatic. An informed senior banker said borrowers would most likely have to apply to their respective agency to avail of the benefit during the moratorium period. The bankers said they had yet to get a clarification on the matter. The RBI has asked banks to conceptualize policies aimed at providing relief to all eligible borrowers.
Think before choosing
Since the moratorium is not a waiver of any kind, for a salaried class or others who are immune to the lockdown, it makes no sense to opt for it as it will increase their liability, as interest will continue to accrue. Hence, it is beneficial for individuals, traders and companies facing liquidity crunch.