Impact of RBI Latest Guidelines on Business Loan and its EMIs
Last Updated : Feb. 6, 2023, 3:18 p.m.
The Indian Government and our finance minister are in full force to control the financial crisis that are going on in the country due to the Coronavirus Outbreak. Therefore the Reserve Bank of India has cut off the Repo Rate by 0.75%, formerly it was 5.15% and now it has fallen to 4.40%. Repo rate is basically the rate at which the Reserve Bank of India lends money to commercial banks. Now the commercial bank can take more funds from RBI and help the commonly employed and self-employed individuals to fight the financial crisis happening due to lockdowns.
Many businesses are also been affected by the lockdown and the exiting business loan takers are worried about the repayment of the loans. So, the Reduced Repo Rate will have a great impact on the EMIs of Business loans. But before we the advantages of the RBI’s decision, let’s throw some light on the guidelines given by the Reserve Bank of India.
Guideline Given by RBI between 24th to 27th March
- Repo Rate is Reduced by 0.75%.
- The Reverse Repo Rate is reduced by 90 basis points.
- The Cash Reserve Ratio is Reduced by 100 basis points to release INR 1.37 lakh crores for 1 year.
- RBI has reduced the Minimum Daily Cash Reserve Ratio balance to 80% from 90% till the 30 th of June 2020.
- Every term loan borrower will get 3 months moratorium on the outstanding loan amount for repayment.
- All the interest on working capital facilities to be deferred by 3 months.
- The Total Liquidity Injection would be 3.4% of the GDP.
Benefits of the RBI Guideline for the Business Loan Takers
We can see that the lockdown in the whole country has affected many businesses but the RBI guidelines have leveraged the businesses and gave an opportunity to the businessmen to bring their business on track. You must go through the benefits of this smart move made by the Reserve bank of India.
A Relief from EMIs
According to the RBI’s guidelines, every individual having a business loan gets 3 months moratorium on the EMIs. In simple words, it means that you can skip the EMI of an existing business loan for three months. No extra interest or penalty will be charged while skipping the EMIs. On the other hand, skipping the EMIs for 3 months will not affect your CIBIL or Credit Score. You are free from the burden of EMIs for 3 months.
Advantage of this Guideline
- A sign of relief from the business Loan EMIs for 3 months.
- Tackle the Financial Crisis easily that is due to the Coronavirus.
- Although you don’t pay EMI on the existing business loan for 3 months, your credit score will not be affected.
- Make the optimum utilization of the 3 months’ time to bring your business back on the track.
Business Loans will be Available at a Lower Rate of Interest
As the RBI has cut off the Repo Rate by 0.75%, so the commercial can borrow the money from RBI at a lower rate and as a result of which the commercial banks will grant business loans to the owners at a lower rate of interest. Therefore you take a fresh business loan or a top-up on your current business loan at a low rate of interest.
Advantage of this Guideline
- Take a top-up business loan at a low rate of interest and improve your business activities.
- Apply for a fresh business loan to manage your working capital.
- Stabilize all your business activities during lockdowns through the new business loans available at a cheaper Interest rate.
Conclusion
You can see how the RBI guideline will help you to take a business loan and improve the financial condition of your business. If you have an existing business loan then you can skip the EMI of that loan for 3 months and no penalty will be charged for doing so. On the other hand, you can meet the financial crises by taking a new business loan from the commercial banks as they will grant you a business loan at a low rate of interest because the Reserve Bank has reduced the Repo Rate and Reverse Repo Rate. Now it is up to you to decide the best move for your business.