IMPORTANT: Read the RBI's massive statement allowing 3-month EMI moratorium on term loans

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday addressed the media via video conference, a day after the government announced a Rs 1.7 lakh crore package to help the poor and migrant workers tackle the financial difficulties arising from the 21-day lockdown imposed due to the Coronavirus pandemic. 

The Governor said that the Reserve Bank has permitted all lending institutions to allow a 3-month moratorium on payment of instalments on term loans. The RBI's statement reads as follows:

Moratorium on Term Loans

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) (“lending institutions”) are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020. Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, maybe shifted across the board by three months.

Deferment of Interest on Working Capital Facilities

In respect of working capital facilities sanctioned in the form of cash credit/overdraft, lending institutions are being permitted to allow a deferment of three months on payment of interest in respect of all such facilities outstanding as on March 1, 2020. The accumulated interest for the period will be paid after the expiry of the deferment period.

In respect of paragraphs 'Moratorium on Term Loans and 'Deferment of Interest on Working Capital Facilities' (above), the moratorium/deferment is being provided specifically to enable the borrowers to tide over the economic fallout from COVID-19. Hence, the same will not be treated as a change in terms and conditions of loan agreements due to the financial difficulty of the borrowers and, consequently, will not result in asset classification downgrade. The lending institutions may accordingly put in place a Board approved policy in this regard.

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Easing of Working Capital Financing

In respect of working capital facilities sanctioned in the form of cash credit/overdraft, lending institutions may recalculate drawing power by reducing margins and/or by reassessing the working capital cycle for the borrowers. Such changes in credit terms permitted to the borrowers to specifically tide over the economic fallout from COVID-19 will not be treated as concessions granted due to financial difficulties of the borrower, and consequently, will not result in asset classification downgrade.

In respect of paragraphs above, the rescheduling of payments will not qualify as a default for the purposes of supervisory reporting and reporting to credit information companies (CICs) by the lending institutions. CICs shall ensure that the actions taken by lending institutions pursuant to the above announcements do not adversely impact the credit history of the beneficiaries.

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WATCH RBI Governor's full news conference here: