Last week, the Reserve Bank of India had announced a 3-month moratorium on all term loans outstanding as on March 1, 2020, as well as relief on working capital facilities to ease the burden caused by the Covid-19 outbreak. Here, the Indian Banks Association clarifies a few frequently asked questions on the matter:
Which are the benefits and are they available to all?
All term loans and cash credit/overdraft are eligible for the moratorium. Further, to avoid unnecessary paperwork the facility has been extended across the board to all borrowers by extending repayment of term loan instalments (includes interest) by 90 days. For e.g. a loan repayable in 60 instalments maturing on March 1, 2025 will mature on June 1, 2025.
Is rescheduling only for the principal amount?
Rescheduling of principal can be done for a period of three months between March 1, 2020 and May 31, 2020. For example, where the last instalment falls due for payment on March 1, it will become payable on June 1. For EMI-based term loans, there will be three EMIs falling due during the period and the tenor will be extended by three months. These will have to be repaid during the extended period, as per the example above.For other term loans, all the instalments and interest will fall due during the same period, irrespective of the tenor of payment i.e. monthly, annually, bullet payment etc. Where the repayment has not commenced, the interest portion for three months alone needs to be reckoned.
What if the extended tenor goes beyond the maximum period in the loan policy?
This can be extended without seeking approvals.
What will be the impact on defaulting borrowers?
Overdue payments post March 1 will not be reported to Credit Bureaus for three months. No penal interest or charges will be payable to the banks. It will not be considered a default by rating agencies.
Should you necessarily take the benefit?
You may take the benefits if there is a disruption in your cash flows or there is loss of income. However, you must take into account that the interest on loans continues to accrue and will result in higher cost.
What about my credit card dues?
The relief is available for credit card payments too. Interest will be charged by the issuer on the unpaid amount. However, no penal interest will be charged.