How RBI is giving relief to Small Businesses during Corona outbreak

March 27, 2020
Harshna Paroha

As the Covid-19 pandemic repercussions are getting more intense with each passing day, the Government of India is working actively on a set of policy measures in order to combat the economic impact of the Coronavirus.
The dire proactivity is quite visible in the policymaking committee as the Reserve Bank of India’s Monetary Policy Committee decided to advance its pre-scheduled meetings of 31st March, 1st and 3rd April 2020 to be conducted on 24th, 26th and 27th March 2020. This was done after carefully evaluating the current and evolving macro-economic and financial conditions in the country.
In a big relief to the corporate sector, the RBI Governor Shaktikanta Das allowed a 3 months moratorium (a temporary prohibition or deferment) on payment of installment in respect of all term loans outstanding on March 1, 2020. Furthermore, the apex bank also announced deferment of interest payment on working capital loans by three months.
We have summarized the most commonly asked questions for you, related to this decision:

Q: My EMI is due soon. Will the payment not be deducted from my account?
A: The RBI has only allowed banks to allow a moratorium. Individual banks will have to allow suspension of EMIs. The borrower will have to request the bank and show that his or her income has been impacted by the coronavirus disruption. This means that unless you have specific approval from your bank, your EMIs will still be deducted from your account.

Q. Is this a waiver of EMIs or a deferment of EMIs?
This is not a waiver, but a deferment. You will have to pay the EMIs at a later date as decided by the bank. The RBI has told banks to have board-approved policies in place on moratorium/deferment.

Q. Which banks can offer this deferment to their customers?
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) included

Q: Does the moratorium cover both principal and interest?
A: Yes. It does. If announced by your bank, you can forego payment of your entire EMI, including payment and interest.

Q. What kind of loans does the moratorium cover?
The RBI policy statement explicitly mentions term loans, which include home loans, personal loans, education loans, auto and any loans which have a fixed tenure. They also include consumer durable loans, such as EMIs on mobiles, fridge, TV, etc

Q: Does the moratorium cover credit card payments?
A: Since credit cards are defined as revolving credit and not term loans, they are not covered under the moratorium.

Q: I have taken a business loan. Can I not pay my EMI?
A: The moratorium has been allowed on retail loans.

Q: What has the RBI announced for businesses?
A: The RBI has allowed deferment for interest payments for all working capital loans taken by businesses. The accumulated interest for the period will be paid after the expiry of the deferment period. Moratorium/deferment will not be treated as a change in terms and conditions of loan agreements and will not result in asset classification downgrade.

As MPC will continue to take accommodative measures in order to revive growth again while mitigating the impact of the global recession on the Indian economy, we will continue bringing to you all the latest updates and measures to tackle coronavirus. We have also compiled an article on 5 most essential practices which every business owner should follow during the outbreak. We hope you all stay safe and follow all the necessary precautions and give a good fight to Covid-19.

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