Resolving The Installment Dilemma

Think carefully before you opt for any loan moratorium as it would only lead to a higher liability

- Vishav

With the whole nation under lockdown to slow down the exponential spread of the novel coronavirus (COVID-19), businesses have been hit which has led to a disruption of financial liquidity for a lot of people. Things may have become especially worse for those who have taken loans of one or the other kind had it not been for the RBI’s intervention. Paying Equated Monthly Installments (EMIs) of those loans would have been a nightmare for some of the borrowers whose finances have been affected by an unprecedented nationwide lockdown. However, coming to their rescue, the Reserve Bank of India instructed banks to grant an optional three-month moratorium on all outstanding loans to all borrowers on their EMIs.

Those who can pay their EMIs comfortably should continue to do so

This essentially means that borrowers can defer their EMI installments that are due for payment till May 31, 2020, without any penalties or any impact on their credit scores. Loans ranging from home loans, personal loans, car loans, corporate loans, agriculture loans, and even credit card loans availed from commercial, regional, rural, NBFCs, and small finance banks come under this scheme. However, those availing this optional moratorium would have to pay the interest for this additional three-month period.

Due to this, many questions have arisen among people regarding whether it makes sense for them to opt for this moratorium or whether they should continue to pay their EMI installments during these three months as well. The verdict is not completely straight-forward. The moratorium would make sense for those individuals whose capacity to pay their EMIs has been substantially hit. Those who can pay their EMIs comfortably should continue to do so as opting for a moratorium would only add more liability for them.