RBI’s moratorium on EMIs: What it means for your car/two-wheeler loan?

In light of the coronavirus pandemic, the Reserve Bank of India has allowed banks to offer a moratorium of three months on all term loans. Does this cover your car loan as well?

If you are worried about paying the next instalment on your loan, you can breathe a sigh of relief, as the Reserve Bank of India (RBI) today announced a moratorium on EMIs in light of the ongoing coronavirus pandemic. In layman terms, the RBI has officially permitted banks to allow customers relief from paying their monthly EMIs for the next three months. What does this mean with respect to your existing car or two-wheeler loan? We answer all the questions. 

1.)    Will my upcoming car / two-wheeler EMI not be deducted for the next three months? 
The Reserve Bank of India has only ‘permitted’ lending institutions to offer a moratorium. These institutions will now form their own ‘Board-approved policies’ for extending this benefit to borrowers. In simpler terms, while banks have been advised to provide this relief, its execution rests in their own hands. For instance, they can either choose to provide relief to all borrowers or simply to those unable to pay the dues owing to the COVID-19 crisis. This policy may differ for different institutions, so it is advisable to contact your relationship manager for further clarity. 

Here, it must be noted that moratorium has been granted for the three-month duration starting 1st March to 31st May 2020. So, if your EMI for the month of March has already been deducted, then you will only get relief for your future dues until 31st May.   

2.)    Has this 3-month EMI been waived or deferred? Does it cover the principal and the interest? 
No, this doesn’t mean that your EMIs have been waived off. Consider it more like an extended grace period. Yes, it covers both the principal and the interest.

3.)    Will I be paying more interest for the additional three months? 
No, you will not have to pay any additional interest for the three-month duration. The EMI and total interest paid will remain unchanged. 

4.)    Will I need to pay them all together in June/July? 
No. The overall loan tenure will be extended by three months. 

5.)    Will this hamper my credit rating? 
No. Since this provision has been made by the RBI, it will not affect your credit rating. 

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