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RBI’S BIG EMI RELIEF – What It Means for You!

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RBI EMI Relief

Worried that the 21 Day India-wide Corona Lockdown will stress your personal or business finances? You are not alone. The RBI has announced a Big Relief Measure for those with running Loans or pay EMIs. Here’s how it can help you…

What IT IS:

A 3 month EMI Moratorium = Deferment = Holiday for your Loan Repayments and EMIs falling due between March 1, 2020 and May 30, 2020. That is, your Loan Repayment Schedule can be shifted by 3 months to after the moratorium period.

What Does that Mean?

You can delay or postpone your re-payments of all Loans and EMIs for a period of 3 months, without it being considered a default, causing no harm to your Credit Score or Rating.

What IT IS NOT:

It is NOT a Loan Waiver. After 3 months, you still have to repay your Loans in full, on applicable due days. And these repayments would include your pending 3 month repayments (in case you choose to postpone for 3 months)

Then What’s the Benefit?

  • You get to hold on to more funds for 3 months
  • You get a 3 month window to arrange funds for repayment
  • A 3 month delay, will not be counted as Default – you will not be charged late payment fees and penalties for a 3 month delay
  • Your Credit Rating will not suffer

What it will mean for –

Salaried: The amount which would normally be deducted at start-of-month, can act as emergency funds. You will be able to continue paying economically disadvantaged staff dependent on you (eg. Househelp), even though they are unable to show up for work, without compromising your monthly budget, for 3 months. It may also help in case your salary gets delayed.

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Self-employed & Businessmen: A 3 month breather from debt outgos, so that you have some flexibility to maintain your working capital, since your business income may get affected sue to the crisis.

What types of Loans are included?

  • Personal Loans
  • Home Loans
  • Education Loans
  • Car Loans & Auto Loans
  • Consumer Durable Loans – Gadgets, White Goods, etc bought on EMI
  • Credit Card Debt
  • Agri Loans
  • Crop Loans
  • Business Loans
  • Working Capital Loans

Which Banks are included?

  • All Commercial Banks
    • PSU Banks
    • Private Banks
    • Regional Rural Banks
    • Small Finance Banks
    • Local Area Banks
  • All Co-Operative Banks
  • All-India Financial Institutions
  • NBFCs
    • Housing Finance Companies
    • Micro-finance Companies

Does this give me immediate relief, if my EMI is due soon?

  • This is still unclear, but the RBI will soon issue guidelines to Banks. We will keep you updated.

Will opting for this suddenly add to my EMI Load after 3 months?

  • After 3 months, pending EMIs are unlikely to be charged as a lumpsum. They will most probably be spread out through re-adjusted EMI amounts.
  • However, this is still unclear, and we would advise you to be carefully check with your bank, as you still have to repay, one way or the other.

Do I get any Interest Advantage?

  • No. The interest on the outstanding portion of the loan will still continue to accumulate and will not be on a reducing balance basis.
  • However, due to recent and future rate cuts, you might be able to get able to get some interest advantage on floating rate loans. Check with your bank.
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Can I delay paying my Credit Card Bills for 3 months?

  • Yes. However, we strongly recommend against availing it.

Why? Because you will still have to eventually pay the high interest on your Credit Card outstanding – as much as 42% X 3 months! Never rollover your Credit Card Debt even if you have an option. If repayment looks difficult now, consider switching to lower interest Loan types (such as Personal Loan) and then avail EMI deferment benefits.

  • Note that RBI has focused on Fixed Term loans in its announcement, but later clarifications include Credit Card Repayments. Either way, we suggest you clarify with your Bank.

Disclaimer: This document is based on an early interpretation of the RBI Relief Announcement on 27th March 2020 and is only intended as a guide. The information provided is subject to change as better understanding prevails, or RBI issues an update.  Please check with your Bank carefully, before taking any decision.

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