If you are running any EMI based loan such as a Home Loan or a Loan Against Property or an Unsecured Business Loan or a personal loan and are excited about all the talks of a 3-month EMI Moratorium that has been going around, brace yourself!!

Out of the 3 EMIs which are eligible for moratorium, you may have already paid one and may be eligible for just a 2-EMI break.

1. Why do you say that the EMI Moratorium is effectively for 2 months?

The RBI circular number RBI/2019-20/ 186 DOR.No.BP.BC.47/21.04.048/2019-20 clearly states that banks and financial institutions "are permitted to grant a moratorium of three months on payment of all instalments1 falling due between March 1, 2020 and May 31, 2020". This implies that only the EMIs which are supposed to be debited from the borrower’s accounts in the month of March, April and May 2020 are eligible to moratorium.

Now this circular was issued on the 27th of March 2020. EMIs for almost all car loans, home loans, unsecured business loans and personal loans for the month of March 2020 would have been already debited from the borrower’s bank accounts (particularly in the case of NACH debits). If the bank accounts of the borrowers had enough balance, and these EMIs have been cleared, this would mean that these borrowers are eligible only for a Moratorium of April and May 20 EMIs i.e. 2 EMIs only.

2. Why is everybody around me saying that the EMI moratorium is for 3 months?

As mentioned above, RBI has permitted banks to grant moratorium to instalments falling due between March 1, 2020 and May 31, 2020. Therefore, the benefit of 3-months is available to the following:

  • Borrowers, whose EMIs for March 2020 have remained unpaid either because they have already bounced/ returned unpaid even before the announcement was made
  • Borrowers running working capital facilities – the interest for working capital facilities is typically debited by the bank on the last day of the month
  • Borrowers, whose EMI for the month of March 2020 was payable after 27th March and these EMIs have been stopped by the bank.

3. Will the banks refund the EMI of March 2020, which has been debited from my account, if I opt for a 3-month moratorium?

No clarity on this has been provided either by the RBI or any of the banks. However, it is unlikely that an EMI refund would happen.

Link to RBI Circular: https://m.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=11835