RBI allows 3-month moratorium on loans, EMI amid disruption caused by coronavirus outbreak

The Reserve Bank of India (RBI) on Friday authorized banks, non-bank financial institutions (NBFCs), including finance companies, and other financial institutions to permit a 3-month moratorium on clearance of instalments on term loans in the midst of disarray brought about by coronavirus outbreak.

The RBI governor Shashikanta Das made the declaration, needed by the middle class and small entrepreneurs, and stated that the putting back will not have an effect on the credit history of the lender.

The 3-month moratorium authorized by the central bank will come to the aid of lenders in ameliorating the load on their savings and keep away from turning defaulters.

The RBI has also permitted banks to restructure the working capital circle for institutions without being concerned that these will have to be categorized as non-performing assets in the time of 21 day nationwide lockdown.

“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,” RBI said in a release.

“Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, may be shifted across the board by three months,” it added.

As soon as, Union Finance Minister Nirmala Sitharaman issued a tweet to say measures announced by RBI gave a “much-desired relief”.

“Appreciate @RBI @DasShaktikanta’s reassuring words on financial stability. The 3 month moratorium on payments of term loan instalments (EMI) & interest on working capital give much-desired relief. Slashed interest rate needs quick transmission (sic),” Sitharaman said.

RBI also marked down the key lending repo rate by 75 basis points to 4.4% and reverse repo rate by 90 basis point to 4% to revitalize enomomic growth in the thick of Covid-19 outbreak.

The decision was taken in an unscheduled meeting of RBI’s monetary policy committee, which was initially slated to hold its bi-monthly review next month.

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