RBI has said that during the moratorium period interest will continue to accrue on the outstanding portion of the loan. Hence, the moratorium period will not come for free.
The RBI last week permitted banks to allow moratorium of 3 months on payment of installments for all loans, including personal loans, home loans, car loans, among others. Top banks along with housing finance companies (HFCs) are to extend the moratorium option to all their customers.
Banks such as SBI, ICICI Bank, HDFC bank, and Axis Bank, will provide the moratorium option to all their customers irrespective of the amount and tenure of the loan taken by the borrower. Banks will communicate with customers through emails and messages.
The banks are to come up with a customized solution wherein borrowers will reach a link where once he/she enters their loan account number, they will get details like by how many months the loan tenure will increase, if he opts for the moratorium, and how much should he/she increase the EMI if the borrower wants to keep the same tenure.
Once the banks notify the borrowers, they can opt for the moratorium which will allow them to not pay the EMI installment for 3 months.
RBI has said that during the moratorium period interest will continue to accrue on the outstanding portion of the loan. Hence, the moratorium period will not come for free. Experts believe this might also increase the borrower’s burden significantly due to an increase in tenure of the loan or increase in EMIs.
For instance, if one opts for the moratorium, the interest amount of this period of 3 months will get added to one’s principal outstanding amount. Hence, industry experts say the moratorium should only be opted by borrowers who are having a problem with their monthly income and therefore finding it tough to service the loan.
Moreover, borrowers with lower tenure and principal, will not face a huge burden from the moratorium. In this case, if a borrower opts for the moratorium, he/she will see their tenure increase by one or two months of the loan, with the EMI remaining the same.