How To Calculate 3 months Loan moratorium as per RBI Guidelines ?

Which are the loan accounts eligible and not eligible for the 3 Months EMI moratorium –  In order to mitigate the impact of the corona-virus outbreak on businesses and employees, the Reserve Bank of India asked all banks and other lending institutions to allow a three-month moratorium on all kinds of loans. The RBI also said that moratorium on term loans and deferment of interest payment would not result in asset classification downgrade.

Moratorium period refers to the period of time during which you do not have to pay an EMI on the loan taken. This period is also known as EMI holiday.

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Which type of the loan will be considered and whether loan account will be slipped to NPA due to previous arrears ?

A three-month moratorium on all kinds of loans i.e. Term Loans as well as Working Capitals

The reprieve will be available for loans taken from any financial institution for all loans outstanding as of 1 March 2020.

The three-month moratorium will permit banks to avoid a large onset of NPAs during the 21-day lockdown and keep their books healthy.The RBI has also allowed banks to restructure the working capital cycle for companies without worrying that these will have to be classified as NPA.

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RBI’s 3 Month Loan moratorium not applicable on :

The RBI moratorium won’t be applicable on credit card repayments as outstanding on such accounts is not classified as a term loan.

In addition, the RBI has clarified that the rescheduling of payments will not qualify as a default and there will be no risk of the account being classified as a non-performing asset. This means non-payment of EMIs for the next three months will not adversely impact the credit history of the beneficiaries.

What to do ?

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 means all the eligible term loans will be shifted for repayment as on 30th June 2020. All eligible loan accounts will be rescheduled.

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The RBI also said that moratorium on term loans and deferment of interest payment would not result in asset classification downgrade. The rescheduling of payments will not qualify as a default for the purposes of supervisory reporting and reporting to credit information companies (CICs) by the lending institutions. CICs shall ensure that the actions taken by lending institutions pursuant to the above announcements do not adversely impact the credit history of the beneficiaries.

It means these periods will not be considered while calculating the CIBIL Credit Score for the borrowers. RBI further said that all lending institutions and banks had been allowed to defer interest on working capital repayments by three months. The RBI also allowed banks to reassess the working capital cycle and said that they won’t be treated as non-performing assets.

This will provide relief to many individuals, especially the self-employed, as they would have found it difficult to service their loans such as car loans, home loans etc due to loss of income during the lock-down period. If they had missed any EMI payment they were risking adverse action by banks which could have hit their credit score.

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