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RBI allows all banks, NBFCs to put EMIs on hold for three months

Non-payment of EMIs for the next three months will not impact the credit score or credit history of the borrower.
In a major relief amid the lockdown, the Reserve Bank of India has announced that all banks and lending institutions can allow a three-month moratorium on all loans outstanding as of March 1, 2020. This includes all forms of retail loans and EMIs.
What this means is that if a borrower is unable to pay their EMI for the next three months, the bank will not classify it as a non-performing asset, neither will it hurt your credit score or credit history. This should come as a major relief to people who have home loans, car loans etc, and are facing pay cuts in the wake of the COVID-19 lockdown.
RBI has said that the repayment schedule and all subsequent due dates, as also the tenure for such loans, may be shifted across the board by three months.
This includes term loans taken from all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and Non Banking Financial Companies (NBFCs) including housing finance companies and micro-finance institutions.
The RBI has also also announced that all lending institutions are allowed to defer interest payment on working capital repayments outstanding on March 1, 2020, by three months. That means the interest you have to pay on your loan does not increase – you have to pay the same amount overall that you owed at the beginning of March.
“The moratorium/deferment is being provided specifically to enable borrowers to tide over the economic fallout from COVID-19. Hence, the same will not be treated as change in terms and conditions of loan agreements due to financial difficulty of the borrowers and, consequently, will not result in asset classification downgrade. The lending institutions may accordingly put in place a Board approved policy in this regard,” RBI Governor Shaktikanta Das said.
RBI also cut the benchmark interest rate by 75 basis points to 4.4%  to deal with the hardship caused due to the outbreak of COVID-19.
To help banks, the central bank also reduced the cash reserve ratio (CRR), or the minimum amount a bank has to deposit with the RBI in the form of cash, by 100 basis points to 3% with effect from March 28 for one year. This reduction in the CRR would release primary liquidity of about Rs 1,37,000 crore uniformly across the banking system. This dispensation will be available for a period of one year ending on March 26, 2021.
The RBI has also announced that lending institutions may recalculate drawing power by reducing margins and/or by reassessing the working capital cycle for the borrowers.
The governor said that such changes in credit terms, which have been permitted to borrowers to specifically tide over the economic fallout from COVID-19, will not be treated as concessions granted due to financial difficulties of the borrower, and consequently, will not result in asset classification downgrade. The rescheduling of payments will not qualify as a default.
RBI has also asked credit information companies (CICs) to ensure that the actions taken by lending institutions based on the announcements do not adversely impact the credit history of the beneficiaries.
The RBI said in its bi-monthly monetary policy statement that there is a rising probability that large parts of the global economy “will slip into recession”.
Talking about GDP estimates, the RBI Governor said that the National Statistics Office had forecast 4.7% GDP growth for Q4 of 2019-20, and a 5% for the whole year. This, he said, was now at risk.
“High frequency indicators suggest that private final consumption expenditure has been hit hardest, even as gross fixed capital formation has been in contraction since Q2:2019-20. On the supply side, the outlook for agriculture and allied activities appears to be the only silver lining, with foodgrains output at 292 million tonnes being 2.4% higher than a year ago.
The RBI has been taking measures, he said, and added that with the announcement of Friday’s measures, RBI has injected liquidity equivalent to 3.2% of the GDP. Along with Friday’s measures, the RBI announced that liquidity of Rs 3.74 lakh crore will be injected into the system.
In his closing remarks, the RBI governor assured depositors that the Indian Banking system is safe and sound. “Don’t link share prices to safety of deposits. Depositors of commercial banks including all private banks need not worry about the safety of their funds,” he said, while urging people and public authorities to not to resort to panic withdrawal of funds from banks.
He also said that despite the current situation due to the pandemic, he is optimistic and that fundamentals of the Indian economy are sound and stronger than what they were in the aftermath of the global financial crisis of 2008-09.
“The fiscal deficit and current account deficit are much lower, inflation conditions are relatively benign and financial volatility measured by change in stock prices from recent peaks and average daily change in exchange rate of rupee is distinctly lower. COVID-19 is upon us, this too shall pass,” he added. 
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