Personal Loan EMI Relief: All Banks and NBFCs to allow 3-months Moratorium on Personal Loans

Last Updated : March 27, 2020, 6:17 p.m.

After the recent Coronavirus Pandemic entered into our country, there have been so many questions that seem to have no answers right now. The whole country is looking over a long lockdown to mitigate the effect of this pandemic. Offices are shut down, shops are standing still with no business to offer, small business owners have no other option than to stay at home, and many individuals are facing the threat of losing their jobs due to this ongoing pandemic across the world.

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This ongoing financial stress has made people worry about the EMI payments they have to make in the next few months. A lot of people have opted for a personal loan to fulfill their various needs before all this started. Since now it has affected both the salaried and self-employed individuals equally, they are facing a threat of missing their repayments due to the crippling repayment capability and uncertainty regarding their monthly income after the imposed lockdown by the Indian government for 21 days.

In the recent measure announced by Reserve Bank of India (RBI) to control the economic impacts caused by the lockdown due to this pandemic, all Banks, NBFCs and Small Payment Banks will have to allow a mortarium of three months on the EMI payments of all the term loans across all segments outstanding on March 1, 2020. The clarity still awaits whether the EMI will be shifted automatically by 3 months or someone has to give a proof for the loss of income caused by the pandemic. Experts are divided in their opinions. The coming days will give us a better clue.

What is the Exact Meaning of this Announcement by RBI?

This measure taken by the central bank does only mean one thing that whoever has taken a personal loan or any other kind of term loan and has to pay the EMI in the upcoming next months will have to pay the EMI later. And this applied for your entire EMI amount – principal and interest amount.  In case the moratorium is given to a concerned borrower, his/her EMI repayments would not be deducted by the bank for the upcoming three months and the payments would only restart after this period expires. The entire period will be shifted into next three months.

How much Personal Loan EMI can you Save during these Three Months of Relief?

Now after the RBI has announced some major relief on EMI payments, you have the option of saving these EMI amounts for the next three months. We will tell you about how much you can save it during this period.

Let’s understand through this with the help of an example. Suppose that an individual who has opted for a personal loan of INR 5 lakh for 4 years at an interest rate of 15%. So according to these details, he must be paying an EMI of INR 13,915.

And after the relief provided by the RBI, he could save an amount of INR 41, 745 over a period of three months. As he has the option of paying this EMI amount after this period only. This amount can be used for other purposes which do have more priority at this moment. And in case, if an individual will not get his monthly income during this period, he can easily utilize such savings.

It’s just an example for this amount. People with higher loan amounts will have to pay a lot higher EMI amount towards the repayment of their loan. You can have a look at the EMI amount for different tenure periods for various personal loan amounts so that you can get an idea about the savings that you can do for different loan amounts. Have a look at it below!

Personal Loan EMI for Different Loan Amounts at an interest rate of 10.45% per annum

Personal Loan EMI for Different Loan Amounts at an interest rate of 18% per annum

Do you need Lenders’ Approval for EMI Amount Postponement?

Given the sharply divided opinions of experts, it is slightly difficult to gauge now. Maybe in the coming days, things will clear out.

Will Borrowers have to pay 4 Months EMI Amount at the end of a 3-month Moratorium?

It is left to the discretion of banks as how they go about it. They may either ask for the interest payment of three months in one go the moment the moratorium period expires or get it adjusted in the EMI once the repayment starts after a layoff.

Will Your Credit Score Go Down During this Three-Month Moratorium?

There would not be any hit on the Credit Score of any individual during this period if you miss any repayments, which is also a huge relief for all the borrowers. The governor has made it very clear that no down gradation will happen in the credit score of any individuals on account of the 3-month moratorium.

So, as a personal loan borrower, you are safe when it comes to your credit score.

This announcement has come as a huge relief to individuals who were facing a huge loss in their income and would likely miss their repayments in the next few months. This would certainly help in rebuilding their finances and in starting fresh once this pandemic is over and the economy would start to bloom.

The other important measures announced by the RBI are mentioned below.

• The governor of RBI, Shaktikanta Das, also announced the reduction in repo rate and reverse repo rate to ensure the revival of economic growth.
• The repo rate has been reduced by 75 basis points ( 100 basis points = 1%) which made the repo rate to 4.4% from the earlier 5.15%. This measure will make sure that banks will access funds at a lower rate from the RBI. Repo rate is the rate at which the central bank lends to commercial banks, so when it gets lowered, the cost of funds for banks reduces and reflects in the lower rates of borrowers.
• The reverse repo rate has also been reduced to 90 basis points. It now stands at 4% from the previous 4.90%.
• These cuts in repo rate and reverse repo rate were made to ensure the financial stability and liquidity across the country.

Why was this Emergency Measure Needed?

First of all, you all need to know that this measure to tackle the economic impact caused by the ongoing pandemic does not come under the RBI’s bi-monthly policy review, in fact, it was an emergency measure.

The government understands that this ongoing epidemic will burn a hole in the repayment capability of a lot of individuals whether they are salaried and self-employed. Businesses have been bearing the brunt of it and there will be many people who will not get their monthly income on time. Both of these factors will affect their repayment capability as not everyone has not a lot of savings on which they can fall back.

That’s why it was a wise and understandable decision from the RBI to give the relief on the EMI payments on personal loans as well as other loans.

After the RBI announcement of 3-month moratorium period, individuals who were worrying about how they make the repayments can have a huge sigh of relief. RBI also said that there will be no impact on the Credit Scores of individuals if they do not pay their EMIs on time during this 3-month period. But you need to remember that, the interest will keep accumulating. So, in case you have enough money in your savings to pay your EMI, you should pay your EMIs on time. Delaying them for the future will put an unnecessary burden on your finances. So it’s better to make a wise decision.

As the RBI cuts its repo rate to 4.40%, your EMI will also get a lot cheaper if you have taken loans from banks that have the personal loan interest rate linked to the repo rate. So, this is also something you can cheer about in these difficult times. The Repo Rate Linked Lending Rate for your personal loans will be surely lesser as compared to now. Borrowers who have taken personal loans from the leading public sector banks will get huge benefits from it as these banks are pricing personal loans based on RLLR from the previously used MCLR linked lending rates.