RBI takes measures to alleviate stress on the Residential Sector

In the unprecedented wake of the outbreak of the novel pandemic, COVID19, the RBI has announced a list of revisions in the Monetary Policy to minimize the effects of the 21-Day lockdown. The revisions, effective from 28th March, should provide ample alleviation of the stress on all business, and in particular the housing industry.

Here are the highlights from the announcement by the Governor of RBI

  1. Repo rate reduced by 75 basis points to 4.4%
  2. Rev repo reduced by 90 basis points to 4%
  3. GDP growth for Q4 19-20 and FY 20-21 to be affected
  4. Aggregate demand may weaken which will have to be cautiously addressed by the industry as a whole
  5. The future outlook seems uncertain and negative
  6. CRR reduced by 100 basis points to 3% for 1 year to release Rs.1.37 lakh crore
  7. Min daily CRR balance reduced from 90% - 80% till 30/06/2020
  8. Rs. 3.74 lakh crore liquidity injected
  9. 3 month moratorium on payment of installments of Term Loan outstanding
    • For all commercial banks, co-operative banks, all-India Financial Institutions, and NBFCs
    • An appeal must be made for the moratorium pending the concerned Banks approval
    • Moratorium available on both, principal and interest.
  10. Interest on WC facilities to be deferred by 3 months
  11. Such deferment not to be considered for NPA
  12. Revised DP calculations by reassessing WC cycle
  13. All measures taken are not to affect credit history
  14. Total liquidity injection 3.4% of GDP

EMI deferral: Is it automatic, are credit card bills suspended, what for businesses, and other questions on RBI moratorium answered

Q: My EMI is due soon. Will the payment not be deducted from my account?
A: The RBI has only allowed banks to allow a moratorium. Individual banks will have to allow suspension of EMIs. The borrower will have to request the bank and show that his or her income has been impacted by the disruption caused by the CoronaVirus. This means that unless you have specific approval from your bank, your EMIs will still be deducted from your account.

Q: Is this a waiver of EMIs or a deferment of EMIs?
A: This is not a waiver, but a deferment. You will have to pay the EMIs at a later date as decided by the bank. The RBI has told banks to have board approved policies in place on moratorium/deferment.

Q: Which banks can offer this deferment to their customers?
A: 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) included.

Q: Does the moratorium cover both principal and interest?
A: Yes. It does. If announced by your bank, you can forego payment of your entire EMI, including principal and interest.

Q: What kind of loans does the moratorium cover?
A: The RBI policy statement explicitly mentions term loans, which include home loans, personal loans, education loans, auto and any loans which have a fixed tenure. It also includes consumer durable loans, such as EMIs on mobiles, fridge, TV, etc.

Q: Does the moratorium cover credit card payments?
A: Since credit cards are defined as revolving credit and not term loans, they are not covered under the moratorium.

Q: I have taken a business loan. Can I avail deferment or moratorium on my EMI?
A: The moratorium has been allowed on retail loans.

Q: What has the RBI announced for businesses?
A: The RBI has allowed deferment for interest payments for all working capital loans taken by businesses. The accumulated interest for the period will be paid after the expiry of the deferment period. Moratorium/deferment will not be treated as a change in terms and conditions of loan agreements and will not result in asset classification downgrade.