RBI’s AID!
Amid the pandemic lockdown, many people are not being paid and are struggling to pay their dues to the banks. Looking at this problem, Reserve Bank of India (RBI) has rolled out a few relief schemes that might help the public to pay the balance amounts to their respective banks and help the economic fallout. It doesn’t mean that all the debts in the nation have been called off but it does give us a chance to make the payments at our comfort.
The RBI’s decision can be elaborated as below:
“The Statement of Development and Regulatory Policies released on March 27, 2020, where certain regulatory measures were announced to mitigate the burden of debt servicing brought about by disruptions on account of pandemic and to ensure the continuity of viable businesses.“ declared RBI.
Rescheduling of Payments:
“With respect to all term loans (including agricultural term loans, retail and crop 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) are permitted to grant a moratorium (a temporary prohibition) of three months on payment of all installments falling due between March 1, 2020, and May 31, 2020. The repayment schedule for such loans as also the residual tenor will be shifted across the board by three months after the moratorium period. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period.” said RBI.
In simple terms:
The three-month ease on payment of EMIs announced by RBI will reduce the repayment pressure on the borrower and bring relief, as many individual borrowers may find it difficult to repay loans as their incomes and salaries get impacted due to the pandemic. It will also help borrowers to understand their income status. All term loans such as home loans, car loans, education loans, consumer durable loans, personal loans, and even credit card payments falling due can also be paid during these three months.
But the catch is that, if a borrower does not apply for the moratorium, then the bank may continue to auto-debit the EMI. Borrowers who will opt for the three-month moratorium will have to pay an additional interest that will be charged on a simple interest basis. The interest will get accrued during the moratorium period and borrowers will have to pay the accrued interest along with their monthly payments from June onwards.
On the lender’s side, RBI has brought down the repo rate from 5.15% to 4.4%. so what is his repo rate you may ask? Repo rate is the interest that the commercial banks have to pay on the total amount of the money borrowed from RBI. So when the repo goes down the banks can borrow much money at less interest.
It is advisable for individual borrowers who have the capacity to repay their loan and interest should continue to make the payments regularly so that the extra simple interest is not applicable to their dues. This way the RBI has given the citizens a sigh of relief during this pandemic.
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