Today the Reserve bank of India takes new initiative to minimize the damage of COVID-19 by announcing three months relief on all outstanding loans EMIs. The move comes just hours after Moody’s Investors Service reduced India’s growth forecasts to 2.5% from 5.3% for the 2020 calendar year. Yesterday the central government announced a Rs. 1.70 lakh crore relief package for poor daily wagers.
The Monetary Policy Committee (MPC) of India decides to cut repo rate by 75 basis points to 4.4 percent by gaining a 4-2 majority. On the other side the reverse repo rate was cut by 90 bps to 4 percent, creating an asymmetrical corridor.
“All commercial, regional, rural, NBFCs and small finance banks are being permitted to allow 3-month moratorium on payment of instalments in respect of all term loan EMIs outstanding on March 31,” the statement says.
Anyone who has a loan outstanding, will not have to pay EMI for the next three months. On Tuesday, Department of Financial Services Secretary Debashish Panda reportedly wrote a letter to the RBI suggesting a moratorium of a few months on the payment of equated monthly instalments (EMIs), interest and loan repayments and also a relaxation in the classification of bad loans.
This is no doubt a huge relief for all EMI payers. Congress President Sonia Gandhi wrote to the Prime Minister Narendra Modi, urging to defer all EMIs for 6 months. “Centre might consider deferring all EMIs for 6 months; interest charged by banks for this period may consequently be waived. All loan instalment deductions from salaries of government employees may also be deferred for six months,” she said.
The 21-day lockdown to combat the coronavirus outbreak has led to reduced business activities and salary reductión. The 3-month moratorium will apply to corporate loans, home loans and car loans. Personal loans will also be under the moratorium. However, credit cards will not be a part of this as it is not a term loan. The global slowdown can make the situation difficult for India and the RBI governor stressed upon the need to keep the credit flowing to the stressed areas of the country.