RBI permits 3 month moratorium on EMI payments on all outstanding loans

RBI MPC statement on coronavirus pandemic explained

She said the three month moratorium on payments of term loan installments (EMI) and interest on working capital, has given much desired relief.

The Reserve Bank of India on Friday cut the benchmark interest rates by 75 basis points to 4.40% in a surprise move that comes amid concerns over economic fallout from the global outbreak of COVID-19.

After the government announced a relief package to support labourers and daily wagers, the Reserve of Bank of India now come up with a slew of measures to minimise the economic impact from Covid-19. The repo has been cut by 75 basis points to 4.4 per cent - the lowest in at least 15 years.

In the face of this, Reserve Bank of India governor Shaktikanta Das was right to acknowledge in his Friday morning address that "tough times never last; only tough people and tough institutions do".

The RBI also permitted banks to provide a three-month moratorium on all term loans and said it stands ready to provide necessary liquidity and take all measures essential to preserve financial stability in the domestic economy.

According to RBI, the repayment schedule and all due dates may be shifted across the board by three months.

The six-member monetary policy committee (MPC) met earlier in the week to arrive at the decision. Also, the reverse repo rate has been dropped been cut by 90 basis points to 4% to support the economy going. "Borrowers have been made dependent on the bank concerned and will be disappointed", the former finance minister said.

Q: Which are the loans covered under moratorium? The central bank said it has chose to retain its accommodative stance as long as it is necessary to revive growth and mitigate the impact of coronavirus on the economy, while ensuring that inflation remains within the target.

All commercial banks, co-operative banks, all-India financial institutions and NBFCs (housing finance companies and micro-finance institutions). Its rate cut follows similar actions by other central banks around the world. The weighted average term deposit rate at 6.52% in January 2020 is lower than the interest rates on different small saving schemes of the government. This will help retain individuals in employment which may be hard otherwise. "Interest-free working capital loans are the need of the hour for SMBs", says Surabhi Talwar, Cofounder of Happy Jars.

Though the RBI's comprehensive measures are welcome and meet most market expectations, the baton now passes on to the most critical component of the economy - the financial sector. It helps in putting a control on the amount of money supply in the economy. Till that time, we can all remain optimistic. Rucha Ranadive, Economist CARE Ratings also contributed to this article.



Latest news

Joe Montana: Patriots 'Made Mistake' Letting Tom Brady Go
Brady, who will be 43 when the 2020 season opens, had just 24 touchdown passes in 2019, the fewest he's had since 2006. Most players who have been that successful have that makeup that you can't add pressure to him".

Juventus' Paulo Dybala Coronavirus left me struggling for breath
In the past few days, he quickly got exhausted and struggled with breathing problems. Football professional Paulo Dybala is with Covid after his illness - 19 on the mend.

Working together with G20 countries on coronavirus
Terming the pandemic as "the common enemy of mankind", Xi said: "Only by united can the worldwide community can defeat it". US President Donald Trump and Chinese President Xi Jinping discussed the coronavirus pandemic over phone call on Friday.

Davis Love, family unharmed after Georgia home destroyed by fire
Love and his wife, Robin, were in the house at the time of the blaze and called in the emergency at 5:18 a.m. Love III added, "We appreciate all your thoughts and prayers and your respect for our privacy".

Gov. Whitmer requests major disaster declaration from the federal government
Trump also criticized Whitmer on Twitter on March 17 for failing her state. Trump continued, "She doesn't get it done, and we send her a lot".

Other news