Is the Introductory 3-Month Moratorium by RBI EMI Free Period Applicable to Personal Loans?
The Reserve Bank of India (RBI) has introduced a 3-month moratorium for all borrowers as a response to the ongoing coronavirus pandemic. This moratorium allows borrowers to skip or postpone their monthly installment (EMI) payments, providing much-needed relief during these challenging economic times.
Understanding the Moratorium
The moratorium began on March 1, 2020, following the outbreak of the coronavirus pandemic. Specifically, it suspended all monthly installments due from March 1 to May 31, 2020. During this period, borrowers would not be required to make their scheduled EMI payments. However, it is important to note that the interest on the loan would still accrue during this period.
Applicability to Personal Loans
The moratorium announced by the RBI is applicable to a wide range of loan types, including but not limited to personal loans, educational loans, auto loans, working capital loans, and even credit card bills. This means that if you have a personal loan, you wouldn't be required to pay the EMIs during the 3-month moratorium period.
However, it's essential to understand that the interest on the loan will continue to accrue during this period. This accrued interest will be added to your outstanding loan balance, thereby affecting the amount you need to repay post the moratorium period. For example, if you have a personal loan of $10,000 with an annual interest rate of 10%, the interest for the 3-month moratorium period would be approximately $250 ($10,000 * 10% * 3/12).
After the moratorium period ends, you will need to make the additional payments to cover the accrued interest and the regular EMI payments, which would increase the total amount you need to repay.
Official Announcement and Clarification
The announcement was made by the RBI governor to provide financial relief to millions of individuals and businesses affected by the coronavirus pandemic. According to the RBI's statement, financial institutions can allow a three-month moratorium on repayment of credit card dues. This measure is aimed at relieving the financial pressure on the middle class, particularly those who are facing tough financial situations due to the economic disruption caused by the lockdown.
The RBI has been proactive in ensuring that the moratorium is widely understood and implemented. Institutions like banks and NBFCs (Non-Banking Financial Companies) are expected to follow the RBI's guidelines and notify borrowers about the moratorium through email and other notifications.
Steps to Take
Given the current scenario, many individuals are wondering whether the moratorium applies to their personal loans. If you are planning to take a personal loan, it is indeed a good time to do so, as the moratorium would provide you with a break from making EMIs until May 31, 2020. However, it's crucial to review the RBI's official guidelines and consult with your bank or financial institution to ensure you understand the terms and conditions of the moratorium.
Conclusion
The RBI's 3-month moratorium is a significant measure designed to help individuals and businesses weather the financial storm caused by the coronavirus pandemic. For personal loan holders, this moratorium means a temporary reprieve from EMI payments. While the interest will continue to accrue, the moratorium provides a buffer during a challenging period.
To ensure that you are fully informed and to avoid any confusion, it's advisable to speak to your bank or financial advisor, and keep an eye out for notifications from your lender regarding the implementation of the moratorium. This proactive approach will help you manage your finances more effectively during these uncertain times.