Perspectives on Business Management, Economics & Information Technology (PBMEIT) Now also covers research on Psychology

PBME Volume I ISBN: 978-81-946245-3-0

EMI MORATORIUM IN COVID CRISIS - THE EFFECTS ON INDIAN ECONOMY

Author(s): DR. SHALINI MITTAL & DR. SHIVANI CHAUDHRY

Abstract

Moratorium period refers to the period of time during which you do not have to pay an EMI (Equated Monthly Instalment) on the loan taken. This period is also known as EMI holiday. Usually, such breaks are offered to help individuals facing temporary financial difficulties to plan their finances better.

The Reserve Bank of India (RBI) announced loan Equated Monthly Instalment (EMI) deferment primarily to provide relief to those whose loan repayment capacity has been severely impacted because of disruptions caused by the lockdown due to COVID-19. The customers can choose to defer their EMI payments scheduled from 1st March 2020 to 31st May 2020.

Though the specifics will vary across banks, borrowers are likely to be given three options by lenders. Moratorium does not mean a cancellation or waiver of interest. The moratorium is only an option to defer or postpone EMI repayment for the borrower. It does not mean the interest during this period is cancelled or waived off. If the individual avails the moratorium facility, the interest will continue to accrue or get added to the principal outstanding amount. Then, from June 2020 onwards, when EMI will be restarted, the interest will essentially be calculated on the higher principal amount. So, effectively an individual could end up paying a higher interest from June onwards. Hence, one should keep this in mind while deciding to avail the option of EMI moratorium.

Keywords: EMI, loan moratorium, loan deferment, COVID impact

JEL Classification: E20, E52, E58

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