RBI's EMI Relief: All Commercial Loans, Credit Card Payments Included

As part of its measures to curb the economic impact of the lockdown imposed to curb the spread of COVID-19, the Reserve Bank of India (RBI) on Friday allowed banks to offer a three-month moratorium to its customers on re-payments towards term loans outstanding as on 1 March 2020. To clear doubts on the applicability of the same, the RBI has now issued press statements.

What we know so far:

• All commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) ("lending institutions") are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on 1 March 2020.
• The moratorium can be placed on all term loans including agriculture term loans, retail and crop loans falling due between 1 March and 31 May 2020 and will include:(i) principal and/or interest component (ii) bullet repayment (iii) Equated Monthly instalments (iv) credit card dues
• The moratorium will not be treated as a change in terms and conditions of loan agreements due to the financial difficulty of the borrowers and will not result in asset classification downgrade.
• It is a deferment of payment and not a waiver.
• Rescheduling of payments will not qualify as default.
• It will not affect the borrower's credit score.
• The RBI has only permitted the banks to provide the moratorium and the end decision on the same rests with the institution. Customers are advised to check the terms and conditions with their respective bank or lending institution.
• Interests will continue to accrue on the outstanding portion of the term loans during the moratorium period.

With regard to deferment of interest on working capital facilities, RBI said that for those "sanctioned in the form of cash credit/overdraft, lending institutions are being permitted to allow a deferment of three months on payment of interest in respect of all such facilities outstanding as on March 1, 2020. The accumulated interest for the period will be paid after the expiry of the deferment period."