RBI cuts repo to 4%, extends moratorium on loan repayments by 3 more months.

RBI cuts repo to 4%, extends moratorium on loan repayments by 3 more months.

RBI cuts repo to 4%, extends moratorium on loan repayments by 3 more months.

Shaktikanta Das, RBI Governor addresses the media today giving information about new measures of RBI. The RBI governor announces that the MPC has decided to cut repo rate by another 40 basic points to 4%. RBI also extends moratorium on term loan repayments by 3 more months. Earlier the moratorium for repayments of loan was till May 31 but now it is till August 31.

RBI’s decision gives respite to those borrowers whose income is hit due to the coronavirus pandemic. The country has been under weeks-long nationwide lockdown to contain the spread of Covid19.

This is the second time when RBI has increased the time of loan repayment. The first extension was announced in March. A 90-day moratorium on loan repayments was allowed between March 1, 2020 to May 31, 2020. 

In simple words, the extension of moratorium by 3 months on repayments of loan by the borrowers means that they would not have to pay the EMIs during the moratorium period.

A relief to borrowers.

The RBIs moratorium announcement comes as a relief for borrowers in this time of income crisis. This decision will provide the much-needed liquidity to the banks as EMIs that borrowers have to pay for their loan are not deducted from their accounts. 

The borrowers have to pay the EMIs only once the moratorium period is over on August 31. According to the RBI Governor, the interest accumulated for the six month moratorium period can be converted into a term loan.

EMIs to fall.

The EMIs on home and auto loans linked to repo rate are set to fall after RBI’s decision to cut repo rate by 4%. Borrowers can expect the fall in their EMIs from July 1 whose loans are repo-linked.

“The point being, calculate the accumulated interest before you take the moratorium. And see whether you can pay it back, in addition to your EMIs, quickly. If not, you can look for other, albeit slightly difficult, ways to raise cash like breaking your emergency fund. Or taking a loan from family members, so that you can repay your EMIs without moratorium support,” says CEO of BankBazaar.com.

Nidhi Shree

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