EMI Moratorium: Good or Bad? Let’s Find Out!

हमारे YOUTUBE चैनल को सब्सक्राइब करें !

Is it Beneficial or Harmful to opt for the 3 Months Moratorium on EMI Payment (provided by public & private banks)? 

In wake of the country-wide lockdown due to the Covid-19 pandemic, economic activities have been severely disrupted. The RBI, in an attempt to prevent the common man from feeling the extra burden of Loan EMI payments, has announced some measures. These measures are intended to provide relief since people have seen a pause in incomes and cash-flows due to a sudden halt in business activities.

After RBI’s initial announcement on 27th March, many banks have subsequently come out with their individual policies. Rules and modalities for the 3 months EMI Moratorium will vary from bank to bank. As per the below report, borrowers will have to opt for the moratorium relief in case of some private banks.

However, is this relief measure useful or harmful for you? It is vital to note that interest on the outstanding principal amount will continue accruing during the period of the moratorium. If you choose to defer the payment of 2-3 EMI instalments of your loan, the tenure of your loan will increase by atleast 1-1.5 months. The longer the remaining maturity of the loan, the greater will be the impact on the tenure. 

Tweet Dated 31st March by India’s Biggest Lender – SBI 

“In terms of RBI COVID 19 regulatory package, SBI has initiated steps to defer the instalments and interest/EMIs on Term Loans falling due between 01.03.2020 to 31.05.2020 and extended the repayment period by 3 months. The interest on Working Capital facilities for the period 01.03.2020 to 31.05.2020 is also deferred to 30.06.2020.”

It is to be clearly understood that in this 3 month period, only EMI payments can be suspended; interest calculation and accrual won’t stop. At the end of the 3 months, the interest for 3 months would be added to the outstanding principal amount. This will either result in an increase in the EMI amount payable in future months, or else, in case the borrower is unable to bear the higher EMI, the loan tenure might be extended. 

ICICI Bank

ICICI has put all loans and credit facilities into two categories. 

Category A Loans: Moratorium relief is automatic – if you want to opt out, follow the process as described in the link.

Category B Loans: Moratorium relief is not automatic – if you want to opt in for the relief, follow the process as described in the link.

For more information visit – 

https://www.icicibank.com/managed-assets/docs/personal/COVID-regulatory-package-FAQs.pdf

HDFC Bank

If you do not want the EMI moratorium, no further action is required from your side. If you want the EMI moratorium, you will have to provide your consent to the bank through any of the ways given in the following link.

For more information visit – 

https://www.hdfcbank.com/personal/pay/payment-solutions/loan-repayment

Kotak Mahindra Bank

Customers have been advised to write an email to OPT-IN (yes) for the moratorium. The bank also stated that it would charge Interest at the contracted rate in the moratorium period.

For more information visit – 

https://www.kotak.com/content/dam/Kotak/banks-policy-on-covid-related-reschedulement-of-dues.pdf

IDBI Bank

IDBI Bank Customers may opt out from EMI moratorium by writing email to moratorium@idbi.co.in latest by April 15, 2020.

For more information visit – 

https://www.idbibank.in/faq-covid-installment.asp

Lets understand via an example:-

For example, suppose your outstanding loan is ₹1,00,000/- and you are charged 12 percent interest on the loan. So, you have to pay ₹1000/- every month. If you choose not to pay interest every month, then after three months you will have to pay ₹3030.10/-. 

Similarly, if you have taken a loan of ₹20 lakh to buy a truck, over a period of 5 years, at 9.5% interest, you will have to pay an additional interest of ₹47,500/- for 3 months (equivalent to 1.5 EMIs).

Our Advice

You may take the benefits under this RBI 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 later. 

WheelsEye’s suggestion in this situation would be: unless you are under immense pressure, you should continue paying your EMIs on time, or else, an increased loan tenor or higher EMI amounts might increase your pain further in future. 

Have a question related to truck business? / क्या आपके पास कोई ट्रक व्यवसाय से संबंधित प्रश्न है?
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1 comment

  1. Gadi Ki MI Aage badhane Mein post Karen

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