Updated on: March 27th, 2020 2:33 PM

Coronavirus - 3 Month EMI Relief

The Government has unveiled various compliance relaxations and economic measures to help people under lockdown. Today the RBI has announced various measures including a 3 month EMI moratorium to further help individuals and businesses in India as follows:

Moratorium on Term Loans

22. 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 March 1, 2020. Analysis: From the above, it can be ascertained that all loan EMIs will be provided a 3 month moratorium. Thus all loan payments can be deferred and paid after 3 months. 

Deferment of Interest on Working Capital Facilities

23. In respect of working capital facilities 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. The moratorium on term loans and the deferring of interest payments on working capital will not result in asset classification downgrade. Analysis: From the above, it can be ascertained that all loan interest to be serviced on working capital loans can be accumulated and paid at the end of 3 month moratorium period. Thus any interest payment need not be made for working capital facilities over the next three months. The above measures will not impact the CIBIL score or lead to NPA classification.

Easing of Working Capital Financing

24. In respect of working capital facilities sanctioned in the form of cash credit/overdraft, lending institutions are allowed to recalculate drawing power by reducing margins and/or by reassessing the working capital cycle for the borrowers. Such changes will not result in asset classification downgrade. Analysis: From the above, it can be ascertained that banks can increase drawing power by reducing margins or reassess working capital needs without leading to asset classification downgrade. 25. The moratorium on term loans, the deferring of interest payments on working capital and the easing of working capital financing will not qualify as a default for the purposes of supervisory reporting and reporting to credit information companies (CICs) by the lending institutions. Hence, there will be no adverse impact on the credit history of the beneficiaries. Analysis: From the above, it can be ascertained that any delay in payment of loans over the next three months will not lead to an impact on CIBIL score.