RBI’s moratorium on EMIs: all you need to know

The coronavirus pandemic caused massive economic devastation worldwide. This led the RBI to come up with a moratorium on EMIs to help borrowers tide over their financial woes in the wake of the pandemic.

What is RBI’s Moratorium on EMIs?

To help borrowers in India tide over financial difficulties faced due to the onset of the Covid-19 pandemic, RBI offered a six-month moratorium on all EMIs between March 01, 2020, to August 31, 2020. The moratorium was applicable across all types of loans including personal loans, home loans, car loans, credit card dues, etc. During the moratorium tenure, borrowers did not have the obligation to pay their loan EMIs.

Who was eligible for the RBI’s Moratorium on EMI scheme?

All categories of borrowers who had loans outstanding as of March 01, 2020, were eligible to apply for the benefit under RBI’s Moratorium on EMI scheme.

What is the mechanism of a Loan Moratorium?

Borrowers who opt for a loan moratorium are not required to make their EMI payments during the tenure of the moratorium. However, the interest portion is not waived off and continues to accrue on the outstanding amount of the loan. This implies after the loan moratorium period ends, then the borrower would have to pay this additional interest that had accrued during the moratorium period.

How EMI moratorium impacts EMI repayment?

During the loan moratorium period, a borrower can defer EMI repayment though interest on such loan is not waived off and keeps accruing on the outstanding loan amount. As such, after the end of the moratorium period, the borrower will also have to pay such accrued interest along with the normal EMIs, which is an additional burden.

Will opting for RBI’s EMI moratorium impact a Borrower’s Credit Score?

As per RBI’s circular, the credit score of a borrower will not be impacted if they opt for the EMI moratorium scheme offered by the RBI. The loan moratorium was made part of restructuring where the moratorium period could be further extended up to 2 years on prior consultation with the lender.