While the government in a bid to provide relief to individuals and businesses during the Covid 19 pandemic announced 3-month moratorium on all term loans outstanding as on March 1, 2020, the same comes with a catch that one should not and cannot ignore:
So, if you are also considering postponing your EMI payments for the next three months under the RBI's moratorium (provided your bank approves the same) you will need to shell out higher interest on your outstanding loan.
As per experts, banks would calculate simple interest for the 3-month period in which the loan repayment was to be made but was deferred taking advantage of the RBI's relief under moratorium. And this would be added into your EMIs at the end of the 3-month period, thus increasing your monthly EMI amount.
Now what needs clarification is whether this additional interest will have to be serviced in one go or can be adjusted to be paid as an additional EMI.
So, those of you whose cash flows remain intact and are not impacted due to the coronavirus-led lockdowns should diligently make note of their cash flows and compare with the revised repayment schedule and accrued interest, before taking any final call on opting for the 3-month holiday on EMI on your home, auto or consumer durable loan.