RBI introduced EMI (Equated Monthly Installments) moratorium scheme, it is a scheme for borrowers for getting a liquidity relief from EMI payments, but the cost implications of such a moratorium have been estimated to be huge.
In this lockdown period, EMI payment has become a huge issue among many borrowers and bankers or other lenders. While the intention of the RBI to allow banks to offer EMI moratorium on term loans — such as home loan, car loan, personal loans, credit cards — was to provide short-term liquidity relief to the borrowers, the cost implication of such a moratorium has been estimated to be huge.
The topmost lending institutions in the country, Finway expressed their concern towards the borrowers on their repayment, the mindset of borrowers. Mindset changed as per the announcement made by the RBI government that is a three-month extension of the moratorium on loans i.e. till August 31, 2020.
In March 2020, all commercial banks, including housing finance companies, were allowed to extend a moratorium of 3 months on the monthly installments in respect of all term loans outstanding as on March 1, 2020. Any borrower who supports the RBI’s moratorium scheme will not see any negative impact on his or her credit score.
Finway observed that 45% of borrowers were applied for a moratorium PAN India; however this behaviour distinctly noticed in the northern region places like Delhi-NCR. Borrowers in the middle age group people those who either salaried individuals or business entrepreneurs opted more for a moratorium. Based on the nature and scale of lending institutions, the outstanding loans that are coming under moratorium are ranging from 30% to 70%.
Asking for a moratorium is rapidly increasing, but Finway has also observed a sharp fall in the demand for loans. Customers are unwilling to take the loan in this pandemic situation and risk in their business, the only thing in their minds right now is to pay the loans back as quickly as possible. They are cutting down the costs drastically, and all they are doing is restructuring their loans. Most of the NBFCs are facing such situations about borrowers.
According to Finway in this COVID-19 economy is facing a big crisis and financial crisis and people who are under the pressure of repayment of loans are going through a very difficult crisis. Automating savings and investments can save people from going on unnecessary breaks from investing. And lastly, people need to study their finances seriously and plan accordingly. The next few months are going to be rough, but good planning can go a long way,” Chawla adds.
