Three months relief from car loan EMIs

- RBI announces three months moratorium on repayment of loan principal and interest

- Borrowers will have to approach the banks to avail this relief

- The final decision on passing on the benefit to customers rests with the banks

The Reserve Bank of India (RBI) has announced relief on term loan payments for a period of three months. The COVID-19 pandemic followed by 21-days nationwide lockdown had many people worried how they would pay off their loans. As per the latest notification, borrowers of retail loans for cars, two-wheelers, home, education, personal and corporate loans will avail a three month moratorium on repayment of loan principal and interest.  The decision will be applicable to all rural banks, regional, co-operative banks, NBFCs including Housing Finance Companies.

That said, the final decision on passing on the benefit to customers, however, will rest with the banks. The borrowers will have to approach the banks to avail this relief. RBI stated that the moratorium will not result in asset classification downgrade and will have no adverse impact on the credit history of the borrowers. The decision is particularly helpful for individuals who are likely to face a cash crunch during the lockdown period. Banks are allowed to increase the tenure of all existing term loans by three months in case borrowers are not able to pay their EMI for the next three months.

It is worth noting that RBI has also reduced the repo rate by 75 basis points to 4.40 per cent. This will particularly help individuals with loans linked to the repo rate. Effective from 1 April, the interest rate on loans will be reduced by 0.75 per cent.