RBI allows 3-month moratorium on EMIs of all term loans

With the financial activity under severe stress amid lockdowns over the Coronavirus outbreak, the RBI on Friday announced a three-month moratorium on payment of EMIs on all term loans that were outstanding on March 1. The RBI made it clear that this may not affect the credit history of individuals and neither will it let to asset classification.

All commercial banks including regional rural banks, cooperative banks, NBFCs (including housing finance companies) and lending institutions are permitted to permit a moratorium of three months on payment of installments in respect of all term loans outstanding as on March 1, RBI Governor Shaktikanta Das said after an unscheduled Monetary Policy Committee meet.

Banks can also reassess capital cycle and can not be treated as non-performing assets, he said. Mitigating debt servicing burden to stop transmission of monetary stress to the important economy, provide relief to borrowers said the RBI chief.

NITI Aayog CEO Amitabh Kant lauded the RBI governor for taking such a measure and said the three-month moratorium on all loans may be a “timely measure”.

“I compliment the RBI Governor on putting this moratorium of three months and also waving off interest and bringing down the repo rate this is often the thanks to go. this is often a progressive and timely measure,” Kant said while chatting with ANI.

The apex bank has decided to scale back the Cash Reserve Ratio (CRR) of all banks by 100 basis points to three per cent of Net Demand and Time Liabilities with effect from the fortnight beginning March 28 for a period of 1 year.

Meanwhile, Das in his address also assured citizens that the Indian banking industry is “safe and sound”.

“In recent past COVID-19 related volatility available market has impacted share prices of banks also leading to some panic withdrawal of deposits from a couple of private sector banks.” he said.

He urged people to not panic withdraw their deposits from banks. “Your funds are safe,” he said.

“It would be fallacious to link share prices to the security of deposits. Depositors of economic banks including private sector banks needn’t worry on the security of their funds,” the RBI governor said.

The RBI has injected liquidity of Rs 2.8 lakh crore via various instruments adequate to 1.4 percent of GDP. “Along with today’s measures liquidity measures adequate to 3.2 per cent of GDP. RBI will take continuous measures to make sure liquidity within the system,” said Shaktikanta Das in his address.

The Federal Reserve Bank of India on Friday slashed the repo rate by 75 basis points to 4.4 per cent during a bid to bridge over the disastrous impact of the novel Coronavirus on the economy.