To be precise, RBI has permitted banks to allow a moratorium of up to three months in EMI payments. RBI has not advised / requested / mandated banks to provide any moratorium.

It’s really up to individual banks to decide whether they want to offer a moratorium at all, and, if so, for how many months, and decide the modalities thereof such as interest mode, automatic deferrment for everyone or deferrment only based on opt-in by specific borrower, etc.

On the back of RBI’s permission, one bank has offered a moratorium for two months basis opt-in. Another initially offered automatic deferrment for three months but has later changed it to opt-in. Another bank has not offered any moratorium when I last heard a few days ago.

Under normal conditions, if a borrower fails to pay three EMIs consecutively, for whatever reason, they will be declared as defaulter and the lender can commence recovery process and post negative updates to their credit score database.

Now, to understand the use of the moratorium, let’s take the baseline case of a bank offering three months moratorium. Borrowers of this bank who skip three consecutive EMIs will not be declared as defaulters, https://ativanshop.com will not invite recovery process and will not trigger negative updates to their credit score database. That’s a huge lifeline for borrowers who’re unable to make their loan repayments because of the current crisis.

Moratorium is not waiver of either principle or interest. So skipped EMIs have to be paid back later. Interest will not stop during the three months of moratorium, so accrued-and-unpaid interest may become sizeable enough to resemble an EMI and be charged for many months on top of the regular EMI due on those months.

If a borrower opts in for deferrment of EMIs by three months, the tenure of their loan will get extended by three months but, in the case of longer tenor loans, it could also be more than three months.

I see a lot of confusion among people who’re treating this moratorium as kind of trigger for carrying out cost benefit analysis on their personal finances. No, it’s not meant for that.

The moratorium is meant to be a lifeboat, not a way to upgrade to a yacht.

If that true purpose is understood, a lot of confusion can be avoided.