With the lockdown being extended till May 31, the Reserve Bank of India has extended the moratorium of installments of term loans by another three months till August 31, 2020.
“In view of extension of lockdown and continuing disruption on account of COVID-19, the moratorium has been extended till August 31. The total period of applicability will now be six months,” RBI governor Shaktikanta Das said, on Friday.
This could come as a major relief to people who have to pay EMIs home loans, car loans etc, and are facing pay cuts or job losses in the wake of the COVID-19 lockdown.
In March, RBI had announced a three-month moratorium on payment of all term loans due between March 1, 2020, and May 31, 2020.
If a borrower is unable to pay their EMI for the next three months, the bank will not classify it as a non-performing asset, and neither will it hurt your credit score or credit history. This includes all forms of retail loans, EMIs and credit card dues.
Apart from this, the repayment schedule and all subsequent due dates, as also the tenure for such loans, were shifted across the board by three months.
These include deferment of interest for 3 months on working capital facilities; easing of working capital financing requirements by reducing margins or reassessment of working capital cycle; exemption from being classified as ‘defaulter’ in supervisory reporting and reporting to credit information companies; extension of resolution timelines for stressed assets; and asset classification standstill by excluding the moratorium period of 3 months, etc. by lending institutions.
The RBI had also announced in March that all lending institutions are allowed to defer interest payment on working capital repayments outstanding on March 1, 2020, by three months. This has also been extended by another three months.
However, borrowers need not repay the accrued interest in one go to banks post the moratorium period. RBI has allowed the accrued interest to be converted into a funded interest term loan, which will be fully repaid during the course of the due year ending March 31, 2021.
“We received several representations from lending institutions and borrowers that the entire accumulated interest had to be paid back to the bank in one shot posing problems in cash flow management. Taking this into account, the deferment will be converted into funded interest term loan,” the Governor said.
Taking stock of the economic scenario of the country, the RBI governor also said GDP growth in 20-21 is estimated to remain in the negative territory with some pickup in growth impulses in the second half of 2021.
“The combined impact of demand compression and supply disruption will depress economic activity in the first half of the year. Assuming economic activity gets restored in a phased manner especially in the second half of this year, and taking into consideration favorable base effects, it is expected that the combination of fiscal, monetary and administrative measures being currently undertaken both by the government and the RBI could create conditions for a gradual revival in activity in the second half of 2021. Nonetheless, downside risks to this assessment are significant and contingent upon the containment of the pandemic and quick phasing out of social distancing and lockdown,” the Governor added.
Shaktikanta Das also said that the inflation outlook is highly uncertain. “As supply lines get restored in the coming months with gradual relaxations in the lockdown, the unusual spike in food inflation in April is expected to moderate,” he added.
The headline inflation is expected to fall below the Q3 and Q4 target of 2020-21 of 4%.
This, the Governor attributed to current global demand-supply balance, low international crude oil prices, soft global prices of metals and other industrial raw materials, which are likely to keep input costs low for domestic firms, deficient demand and volatility in financial markets.
Among other announcements, the RBI also extended the special refinance facility of Rs 15,000 crore to SIDBI that it had earlier announced at RBI’s policy repo rate for another period of 90 days.
In order to alleviate difficulties being faced by exporters in their production and realisation cycles, the RBI has increased the maximum permissible period of pre-shipment and post-shipment export credit sanctioned by banks from the existing one year to 15 months, for disbursements made up to July 31, 2020.