RBI Moratorium on EMI - Frequently Asked Questions
[Ministry of Finance Press Release dated
01.04.2020]
Last week, the Reserve Bank of India announced a three-month
moratorium on all term loans outstanding as on March 1, 2020, as well as on
working capital facilities.
The Indian Banks Association has answered a list of Frequently
Asked Questions about the technicalities of the moratorium.
QUESTION 1: When/what was the RBI announcement?
ANSWER: Last week, the Reserve Bank of India announced
a three-month moratorium on all term loans outstanding as on March 1, 2020, as well
as on working capital facilities.
QUESTION 2: Why has RBI announced the relief package?
ANSWER: Reserve Bank of India has announced certain
regulatory measures to mitigate the burden of debt servicing brought about by disruptions
on account of COVID-19 pandemic and to ensure the continuity of viable businesses.
It was felt that there may be a temporary disruption in the cash flows, and in some
cases loss of income, for the businesses/ individuals and the present measures work
to bring relief to those businesses / individuals.
QUESTION 3: Which are the facilities eligible for availing the
benefits under the RBI COVID-19 regulatory package and whether the facility is extended
across the board to all borrowers?
ANSWER: All term loans (including agricultural
term loans, retail, crop loans and loans under Pool Purchases) and cash credit/overdraft
are eligible to avail the benefits under the package. This is available to all such
accounts, which are standard assets as on 1st March 2020. Further, to avoid unnecessary
paperwork the facility has been extended across the board to all the borrowers by
extending repayment of term loan installments (includes interest) by 90 days. The
original repayment period for term loans will get extended by 90 days e.g. a loan
repayable in 60 installments maturing on 1st March 2025 will mature on
1st June 2025.
QUESTION 4: Is rescheduling of payments applicable for all kinds
of term loans?
ANSWER: It is applicable for all term loans in
all the segments, irrespective of the segment and the tenor of the term loans.
QUESTION 5: Is rescheduling of term loans only for principal
amount or it also includes interest?
ANSWER: Rescheduling of principal can be done for
a period of three months falling due between March 1, 2020 and May 31, 2020. For
example, where the last installment of a term loan falls due for payment of on say
1st March 2020, it will become payable on 1st June 2020.
For EMI based term loans, it will be three EMIs falling due between
1st March 2020 and May 31st, 2020 and the tenor will be extended
by three months and have to be repaid during the extended period, as per the example
under (2) above.
For other term loans, it will be all the installments and Interest
falling due during the same period, irrespective of the tenor of payment i.e. monthly,
quarterly, half yearly, annually, bullet payment etc. For term loans, where the
repayment has not commenced, the interest portion for three months alone needs to
be reckoned.
QUESTION 6: What happens if the extended tenor of term loan goes
beyond the maximum period stipulated for a product or as stipulated in the loan
policy?
ANSWER: This can be extended for all such term
loans without the need for seeking deviations or approvals.
QUESTION 7: What will be the treatment of interest on the working
capital facilities?
ANSWER: The recovery of Interest applied to cash
credit/overdraft on 31st March, 30th April and 31st
May 2020 is being ‘deferred’. However, the entire interest must be recovered along
with the interest being applied on 30th June 2020 and in cases, where
monthly interest is not being applied, along with the next interest date.
QUESTION 8: What will be the impact of this relief by RBI on
borrowers as far as reporting of default is concerned?
ANSWER: Any delay in payment leads to default and
gets reported to Credit Bureaus. For business loans of Rs.
5 Crores and above, the banks report the overdue position to RBI also through CRILC.
As a result of this relief package, the overdue payments post 1st March
2020 will not be reported to Credit Bureaus/ CRILC for three months. No penal interest
or charges will be payable to the banks. Similarly, SEBI has allowed that Credit
Rating Agencies (CRAs) may not consider the delay as default by listed companies
if the same is owing to lockdown conditions arising due to COVID-19.
QUESTION 9: That means businesses/ Individuals should necessarily
take the benefit?
ANSWER: You may take the benefits under this package
if there is a disruption in your cash flows or there is loss of income. However,
you must take into account that the interest on the loans, though not mandatorily
payable immediately and gets postponed by 3 months, continues to accrue on your
account and results in higher cost.
To give you a perspective, suppose your loan outstanding is Rs 100,000 and you are charged 12 percent rate of interest on
your loans, then every month you are liable to pay Rs.
1,000 as interest. In case you opt not to service the interest every month, you
are liable to pay interest at 12 percent p.a. and accordingly you will pay Rs. 3,030.10 at the end of 3rd month.
Similarly, in case the interest rate is 10 percent, you are required
to pay Rs. 833 p.m. or Rs. 2,521
after three months.
QUESTION 10: Should I get upset if any bank staff or its collection
agent approach me for repayment?
ANSWER: You should not get upset and tell bank
staff/ collection agent that you want to avail the benefit being extended under
regulatory package.
QUESTION 11: What about my credit card dues?
ANSWER: The relief is available for credit card
payments also.
In case of credit card dues, there is a requirement to pay minimum
amount and if it is not paid the same gets reported to Credit Bureaus. In view of
the RBI circular, the overdues in the credit card account
do not get reported to the credit bureaus for a period of three months.
However, interest will be charged by the credit card issuer on
unpaid amount. You should check from your card provider to arrive at interest payable.
Although no penal interest will be charged during this period, but you must remember
that the interest rate on credit card dues are normally much higher compared to
normal bank credit and you should take a decision accordingly.
QUESTION 12: What about interchangeability being permitted from
non-fund based to fund based or FB to NFB for businesses?
ANSWER: The interest applied on the fund based
portion of interchangeability availed during the said period of 1st March to 31st
May 2020 will be eligible for moratorium. In respect of new sanctions accorded from
1st March and availed during the period, the interest applied on the Fund based
portion would be eligible.
QUESTION 13: In what other ways, businesses have been given relief?
ANSWER: The businesses may request the bank to
re-assess their working capital requirements on account of disruption of their cash
flows or elongation of working capital cycle. They may also request for reduction
in margin on NFB facilities (LCs/ BGs etc) or also relief
in Security. Decision will be taken by the bank branches on case-to-case basis based
on the genuineness of the request.
QUESTION 14: Are NBFCs/MFIs/HFCs eligible under the “easing of
working capital financing”?
ANSWER: At present, they are not being considered
under the scheme. However, RBI has made provision for sufficient liquidity support
to these financial intermediaries under recently introduced Targeted Longer-term
Refinancing Operations i.e. TLTRO. Liquidity availed under the scheme by Banks has
to be deployed in investment grade corporate bonds, commercial paper, and non-convertible
debentures over and above the outstanding level of their investments in these bonds
as on March 27, 2020.
Banks shall be required to acquire up to fifty per cent of their
incremental holdings of eligible instruments from primary market issuances and the
remaining fifty per cent from the secondary market, including from mutual funds
and non-banking finance companies. Investments made by banks under this facility
will be classified as held to maturity (HTM) even in excess of 25 per cent of total
investment permitted to be included in the HTM portfolio. Exposures under this facility
will also not be reckoned under the large exposure framework. Banks will be able
to support NBFCs/ MFIs/ HFCs etc. under this window and we do not foresee liquidity
squeeze for these Financial Intermediaries.
QUESTION 14: Will all these measures of RBI be treated as “restructuring”?
What about the provisions applicable?
ANSWER: The measures stipulated by RBI under the
March 27, 2020 circular on COVID-19 Regulatory Package will not be treated as “restructuring”
and hence will not result in asset classification downgrade. Accordingly, the enhanced
provisions for Restructured Accounts will not apply.
QUESTION 15: What about installments/EMIs being recovered through
SI/ECS/NACH? What will be the procedure for refund of the installment/EMIs, if demanded
by the borrower?
ANSWER: Please get in touch with your bank for
the revised mandate