Due to the pandemic, the RBI has allowed banks to offer customers moratorium on the EMI’s, should you avail the facility? Read on.

Yes, the loan moratorium by RBI was announced sometime back but the relevance of this article still remains high and may benefit many readers like you. Don’t forget to share the article on your social media accounts so as to let more readers read the same.

What is Loan Moratorium?

We take loans and agree to pay EMI’s. Under loan moratorium, the bank/lender allows you to delay the EMI payments. The break-in payment won’t affect your credit rating, or commonly known as CIBIL score.

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This article will surely help you as recently the RBI had once again extended the moratorium period by three months, further the Supreme Court of India has just yesterday asked the government to decide if they are willing to give interest waiver to the borrowers or not.

Should the banks give borrowers waiver on the interest rates? Enough on this is being discussed on the internet and believe me, nothing of that makes sense. So, when you opt for the moratorium, what happens? There are three options the lender may ask you to choose from:

  1. You may pay the interest payments alone for the skipped months.
  2. The interest will get added to you future EMI’s, and hence the EMI amount may rise a little when you restart payments.
  3. You may simply choose to extend the term of the payment. Hence you may have a few months of additional payments depending on the loan amount. A small loan may at max have one month of extra payment.

Should there be interest rate waiver? Ask yourself: If I had lent money to someone and the borrower asks me for an interest rate waiver, will I agree? Did you get the answer?

Moreover, the business of a bank is, take money as fixed deposits from investors and lend that money to borrowers. So if the bank does not collect interest from the borrower, then the depositor also should not get the interest on his fixed deposit.

It is true that when you opt for the moratorium, your lender will not be reporting you to CIBIL as a defaulter. That’s the right amount of relief for all those who want to avail the facility. But, not reporting does not mean that the skipping of payments will not be recorded. They will surely be recorded, and the lenders will have the data for years to come.

Hence our suggestion will be not to avail the facility as far as possible. If you have no option but to opt for it, go ahead. That’s why we at VRIDHI and other Financial Planners always suggest keeping the amount of debt under control.

Just assume a lender has Rs.1 Lakh only to lend and there are two borrowers, A and B for 1 lakh each. Meaning the lender can choose only one person to give the money. Both A and B have the same net worth, CIBIL score, etc. The only difference between was: A had availed moratorium once two years back while B continued paying the EMI’s even during the tough times. Now, if you are the lender whom will you give the money to? A or B?

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Vivek Karwa on Sun News
Vivek Karwa