New Delhi: The Reserve Bank of India has put a three-month moratorium on payment of EMIs for all kinds of loans including home loans. This would be applicable for all term loans that are outstanding on 1 March 2020.
No money would be deducted from accounts of borrowers towards EMIs in this period. The EMI payment will resume after the moratorium period gets over.
“All commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) (“lending institutions”) are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020,” said RBI today.
This comes a relief to those who may be finding it difficult to repay the loans in the present times if uncertainty due to the outbreak of corona virus.
The RBI also slashed Repo Rate and Reverser Repo rate sharply today in response to the lockdown amid the outbreak.
The RBI has cut the Repo Rate by 75 basis points from 5.15 percent to 4.4 percent. The Reverse Repo Rate has been slashed by 90 basis points to 4 percent. The Cash Reserve Ration (CRR) has been cut by 100 basis points.
These rate cuts will enable banks to lower the interest rates for home loans, part from other loans. To what extent the commercial banks pass on these rates to the borrowers remains to be seen.
“Government on expected lines have slashed key lending rate by 75 bps and will to some extent help provide respite to struggling Real Estate Sector. The moratorium of 3 months in both Principal and Interest will provide temporary relief in cash flows to Borrowers – both Retail and Developers. The extension of moratorium will avoid any provisioning impact on the Balance Sheet of Banking and non-Banking companies and keep more capital for credit in the system,” said Piyush Gupta, Managing Director- Capital Markets (India), Colliers International.
“The injected liquidity of Rs 3.74 lakh crore along with the 3-month moratorium on all term loans by financial institutions will alleviate short-term liquidity concerns and help developers as well as home buyers survive in these uncertain times. It is important for immediate transmission of these rate cuts to the home buyer which will boost consumer sentiment,” said Ramesh Nair, CEO and Country Head, JLL India.
“By reducing repo rates by 75 basis points, reducing reverse repo by 90 bps, infusing funds to the tune of 3.74 lakh crore in the banking system via various measures and “by announcing a moratorium of 3-months on all term loans including home loans the RBI has shown its decisive intent to mitigate what could have been a severe economic fallout of the corona virus pandemic,” said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com
“RBI’s fresh announcements will further provide relief to several Indians who have been forced to sit home in the wake of the novel coronavirus outbreak, but first all the banks need to make sure that there is a quick transmission of the announced rate cuts to the end consumer, else the whole effort will be futile,” said Amit Modi, Director ABA Corp.
“When home loan interest rates are lower for buyers, they are encouraged further to invest in a home. Apart from this, a moratorium of three months on all outstanding loans including home loans is a major step in order to lighten the burden for all EMI payers to overcome in ongoing circumstances,” said Deepak Kapoor, Director, Gulshan Homz
“If we want to see the growth of real estate sector, which contributes significantly towards the GDP, then EMIs have to be reduced and latest announcement has definitely given that opportunity to individual banks. Another important aspect is the increase in liquidity as reverse repo rate has been cut by 90 basis points. Banks should use part of this money to infuse money in real estate sector and consider it as RBI Governor has stressed upon the need to keep the credit flowing to the stressed areas of the economy,” said Vijay Verma, CEO, Sunworld Group.