Key highlights from RBI press meet
MPC (Monetary policy committee) advanced its meeting (earlier it was scheduled on 3rd April).
Rate cut of repo rate by 75bps to 4.4% and Reverse repo cut by 90bps bps at 4% – widening the corridor. MPC voted in ratio of 4:2 in favour of rate cut.
Liquidity measures for banks
CRR is reduced by 100bps to 3% of NDTL for period of 1 year – INR 1.37 tn will get released across the banking system. Minimum daily CRR maintenance reduced to 80% from 90% ( for period till June).
These liquidity measure will inject INR 3.74 tn to the system
Moratorium on term loans – all lending institutions are allowed to have moratorium of 3 months w.r.t. to term loans.
Deferment of interest on Working Capital Loan (WCL) – deferment of payment for 3 months, accumulated payment will be done after this period. Easing of WCL all these will not lead to any changes in the lending institutions.
Such deferment shall not be considered for NPA. (The deferment is only a suggestion by RBI it’s acceptance depends on individual banks.)
Aggregate demand may weaken.
Future outlook uncertain and negative.
Here are questions on RBI decision related to personal loan / EMI/ credit card bills 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 coronavirus disruption. 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 as decided by the bank. The RBI has told banks to have board approved policies in place on moratorium/deferment.
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 payment and interest.
Q. What kind of loans does the moratorium cover?
A. The RBI policy statement explicitly mentions term loans, which includes home loans, personal loans, education loans, auto and any loans which have a fixed tenure. The also include 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 not pay my EMI?
A: The moratorium has been allowed on retail loans
Q: Will non-payment result in impact on my credit score?
A: Once relief has been granted by your bank, non-payment will not result in any impact on credit score.
Q: Does this mean that I will have to pay all 3 EMIs at one go in June?
A: Unlikely, as the RBI’s statement suggests the tenor may be shifted. That is: the loan may end 3 months later than was originally slated. But more clarity is awaited on this.
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. This will be applicable in respect of all working capital facilities outstanding as on March 1, 2020. The accumulated interest for the period will be paid after the expiry of the deferment period. Moratorium/deferment will not be treated as change in terms and conditions of loan agreements and will not result in asset classification downgrade.
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