How will RBI's 3-month EMI moratorium impact your loans? Here's the answer

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced that commercial banks are "permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020." 

READ: MASSIVE: RBI Announces 3-month Moratorium On EMI Installments Of All Term Loans

Will banks follow?

The decision has created a lot of buzz since those who have retail loans might not need to repay the money for the next three months (effective March 1). This means that if the bank or NBFC permits, then the beneficiary can re-pay the loan July 1 onwards without any change in interest rate or the principal amount.

READ: RBI Cuts Repo Rate By Massive 75 Bps To 4.4% To Revive Growth Amid Coronavirus

The RBI clarified that this will have no impact on the credit history or the credit rating of the beneficiary. "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."

It is important to note that the RBI has only permitted the banks to defer the payments, and has not instructed the banks to do so. Thus, banks can avoid deferring loan payments.

READ: FM Sitharaman Gives First Response As RBI Issues 3-month EMI Moratorium, Slashes Key Rate

Growth projection slashed

This comes after minutes after influential Moody's Investors Service slashed India's 2020 GDP growth projection from its earlier forecast of 5.3% to 2.5% amid the global Coronavirus pandemic. The Indian government had earlier projected GDP growth at 5% in 2019-20 as compared to 6.1% in 2018-19. Q3 had witnessed a 4.7% growth. India has announced a Rs 1.7 lakh crore Coronavirus relief package, split between assuring food security and Direct Benefit Transfer cash-transfer as the country observes a 21-day lockdown to combat COVID-19, of which over 700 infections have been confirmed thus far.

READ: Most Important RBI Briefing: From Repo Rate Slash To 3-month EMI Moratorium