RBI extends moratorium, on May 22, 2020, extended on all term loans, including home loans, by three months, till August 31, while also announcing a 40-basis point reduction in the repo rate.
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RBI extends moratorium, with a view to support economic growth, which is headed towards contraction in the wake of the Coronavirus pandemic, the Reserve Bank of India (RBI), on May 22, 2020, reduced the repo rate to 4%. The 40-basis point cut in the repo rate, at which the RBI lends money to scheduled banks in India, comes two months after the banking regulator cut its key lending rate by 75 basis points, to bring it down to 4.40%.
In a major relief for those servicing loans, including home loans, the apex bank has also extended the three-month moratorium by another three months, till August 31, 2020. The RBI had, in March, announced a three-month deferment on long-tenure loans, keeping in mind the Coronavirus spread in the country and its impact on people’s income.
The new RBI announcement follows a series of announcements made by the banking regulator earlier, to support the economy which has taken a beating because of the pandemic and the subsequent lockdown. The government has also announced a Rs 20-lakh-crore stimulus package, to support the economy.
“All commercial banks, co-operative banks, all-India financial institutions, and NBFCs (including housing finance companies and micro-finance 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,” the RBI said. The RBI, while imposing the moratorium on principal and interest payments for three months on term loans, has told banks that non-payment should not be considered as a ‘non-performing asset’. After a series of rate cuts, the RBI has maintained a status-quo on the repo rate at 5.15%, for the second time in a row
