Moratorium Means, Effect & CalculationAnkit Rastogi
The COVID-19 impact has created medical emergency worldwide and due to complete lockdown in India, all businesses affected immensely. Reserve Bank of India has decided Moratorium to help the business community and other people regarding relief from repayment burden.
Q. What is mean to Moratorium announced by the Reserve Bank of India?
The moratorium means deferment of repayment of loan and credit facility. Normally it gives for the term loan only for plant & machinery purchases. This type of term loan needs some breathing time as a moratorium for repayment principal installments but they have to pay interest on actual disbursement amount to date. Moratorium help business to keep fund follow easily because it gives sufficient time to set up revenue from the plant & machinery and future revenue generate.
RBI Announcement in March 2020
As per the RBI announcement regarding the moratorium on March 2020 for April, May, and June 2020. In which they requested all Bank and NBFC to allow their customer for Moratorium to any type of loan, limit, and other credit facilities for repayment of Interest and Principal amount including interest and principal. So that affected people can get relief from this decision.
RBI Announcement in May 2020
When COVID 19 effect did not end till May 2020 after a total country lockdown in March 2020.RBI decided to again allow for the next three months Moratorium for June, July, and August 2020.After March 2020 announcement by the RBI.
Major points to the effect of Moratorium on people in running loans.
1. In case of Home Loan & LAP
Home Loan and LAP has long tenure like 15 to 20 year and if you take the option of Moratorium of 5 months. You have two options for future repayment, one to increase EMI Amount or second to increase tenure.
If you choose the same EMI amount with increase tenure than you have to pay 15/17 EMI more in your complete tenure of 195/197 months instead of 180 EMI according to you paid EMI tenure.If you choose the same tenure and increase EMI amount that would be your wise decision because you may save more than 50% cost effect.
2. In the case of Business Loan or Personal Loan
Business loan & personal loan has 3 to 4 year and if you take the option of 5 months Moratorium. You have two options for future repayment, one to increase EMI Amount or second to increase tenure.
If you chose the same EMI Amount with increase tenure then you have to pay one more EMI amount. If you chose the same tenure option with an increased EMI amount you may save 25% cost.
Verify – To check your customize details option you can find moratorium EMI Calculator on Google and calculate the exact cost of effect as per your repayment.
Conclusion – It would be a wise decision to choose increases the EMI amount to repay future installments in the case of Moratorium and ask your Bank & NBFCs to remain the same your tenure.