Reality Check-How helpful is the EMI relief

Date:

The Reserve Bank had urged banks not to recover EMI for three months to provide relief to loan payments to traders and citizens amid the ongoing crisis from the Corona virus epidemic. Many government and private sector banks have also implemented this system and started giving relief to their customers in recovering EMIs of loans from March 1 to May 31.

1-Who are eligible for benefits in this RBI package?
All term loans (agricultural term loans, retail loans, crop loans and pool purchase loans) and cash credit / overdraft borrowers are eligible. The repayment period for their installments (including interest) has been extended by 90 days. This means that the loans which were supposed to end on 1 March 2025 after 60 installments, can now be repaid by 1 June 2025.

2-Is this rebate only for the principal loan amount or does it include interest?
Rescheduling of the original loan amount to be repaid between March 1, 2020 and May 31, 2020 can be extended by three months. This will be applicable to EMI based term loans. In case of other term loans, it will be applicable to all installments and interest outstanding during the same period. At the same time, in the term loans which have not yet been started, only the interest payment will be granted for three months.

3- Should all traders / individuals take advantage of it?
If there is any disruption in your income or there is cash constraints, then it must be taken advantage of. However, it has to be kept in mind that the interest on the loan will not have to be paid immediately but it will continue to be added to your account, even during the three-month deferment. This will increase the overall cost of debt.

4-How will the interest on working capital facilities be charged?
Recovery of interest applicable on Cash Credit / Overdraft has been postponed to 31 March, 30 June and 31 May. However, the entire interest will be charged along with the interest payable on 30 June and it will not be taken monthly but will have to be paid simultaneously.

5-How will this step of RBI provide relief from default?
Delays in debt payments are reported to the credit bureaus and are considered default. In case of more than 5 crores, banks report overdue to RBI through CRILC. Following the new instructions, payment information will not be given to the credit bureau or CRILC for three months from March 1. During this time no punitive interest or fee will also be payable.

 

 

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