RBI’s Moratorium Option
RBI’s Moratorium on Loan Repayment in wake of COVID-19
The ongoing COVID-19 crisis has not only created a worldwide health emergency but has also stressed the financial situation of individuals and businesses alike.
While the Government has announced various relief packages, the Reserve Bank of India (RBI) has also announced relief measures for customers who are repaying loans of any kind, to tide over their financial difficulty in servicing the debts.
Accordingly, vide their circular RBI/2019-20/186 & Statement on Developmental and Regulatory Policies dated March 27th, 2020, RBI has permitted banks and financial institutions to provide a moratorium up to 3 months for all payments (both principal & interest) due between March 1st and May 30th 2020.
The accumulated interest along with the principal will be amortized over the period of the loan. This will result in an increase in the existing EMI or an extension of the residual term of the loan to amortize the accumulated interest along with the principal.
HDFC’s Customers will have the following options:
- To increase the EMI.
- To pay the accumulated interest for the moratorium period at the end of three months of the moratorium period.
- To continue making the payments regularly as before.
The customers can opt for moratorium latest by April 25th, 2020 by clicking here.
Frequently Asked Questions
1. What is moratorium?
A moratorium implies that the customers can delay the payment of their monthly loan installments (Pre EMI/EMI) for a limited period as defined by HDFC. The interest, at the applicable interest rate, shall continue to accrue on the outstanding portion of the loan during the moratorium period.
For e.g. If a moratorium of 3 months is granted by HDFC, and a customer wishes to avail of this benefit, then his EMI for March, April and May 2020 gets suspended. From June 2020, the EMI restarts as per the choice opted for by the customer.
2. What is the moratorium scheme announced by RBI to address financial stress caused by COVID-19?
As per RBI’s circular dated 27th March 2020, HDFC and other lending institutions have been permitted to grant a repayment moratorium of up to three months to its customers, on EMIs/Pre EMIs due between March 1st, 2020 and May 31st, 2020. Hence, all loans that were disbursed on or before 29th February 2020 will only be eligible for the moratorium. Interest shall continue to accrue on the outstanding principal during the moratorium period. RBI has not granted a compulsory moratorium. It has only permitted lenders to grant moratorium. Hence customers will have to opt for availing this benefit.
3. Will the moratorium be applicable on principal repayment, interest repayment or both?
The moratorium will be applicable to both principal & interest components i.e. the moratorium is applicable on loans in which customers are paying either EMIs or Pre EMIs.
The interest, at the applicable interest rate, shall continue to accrue on the outstanding portion of the loan during the moratorium period.
4. What is applicable term of the moratorium?
A moratorium of up to a maximum period of 3 months can be offered by HDFC. The lenders are permitted to grant moratorium for all installments due between March 1st and May 31st, 2020.
5. Will the interest continue to accrue during the moratorium period?
Yes, the interest will accrue on your loan during the moratorium period. The EMI will be recalculated at the end of the moratorium period so that the Principal together with the Accrued Interest get amortised over the balance term of the loan.
6. Will I be charged penal interest during the moratorium period?
No, however the moratorium should not be understood as a waiver and hence interest will continue to accrue on the outstanding principal during the moratorium period.
7. Do I have an option to continue paying EMIs/Pre EMIs as per the schedule during the moratorium period?
Moratorium is an option provided by HDFC to its customers who are facing a financial difficulty or a liquidity crunch during this unprecedented situation. However customers who wish to carry on with the payment of their EMIs/Pre EMIs as per their original schedule can do so.
8. Can opting for the moratorium scheme adversely impact the credit score of the customer?
The postponement of the EMI/ Pre EMI payments during the moratorium period will not affect the customer’s credit score. During the pendency of the moratorium period non-receipt of EMIs/Pre EMIs will not be classified and reported as default to the various credit bureaus.
9. What will be my term after the moratorium?
The balance term at the end of the 3 month moratorium period would remain the same as it were before the start of the moratorium. Thus, if a loan had 60 month balance before the moratorium on 1st March 2020, it would now be the same 60 months from 1st June 2020. The total term would, obviously, increase by 3 months.
10. How to opt for moratorium?
You can opt for moratorium by either visiting our website or go through the link that is sent to you through email and SMS. This is to enable you to close your option through the digital mode.
11. What happens if I don’t do anything?
If you don’t do anything i.e. neither opt in or opt out, then we do not change your account. The default choice is, thus, opt out.
12. At what rate will I be charged interest during the moratorium period?
The interest will be charged as per the applicable interest rate on your loan.
13. What happens if I have already paid the March installment?
In that case the applicable moratorium period will be for the remaining 2 months.
14. If I have multiple loans do I have to apply for each one separately?
Yes, you will have to select the moratorium option for each account separately.