RBI Extends Loan Moratorium Period for Another 3 Months; Cuts Repo by 40 bps 

RBI Extends Loan Moratorium Period for Another 3 Months; Cuts Repo by 40 bps 

Must Read:

  • RBI extended the moratorium for another 3 months, from June 1 to August 31.
  • RBI cuts the repo rate by 40 bps to 4% and reverses repo rate to 3.35%
  • RBI allocated Rs 15,000 crore to EXIM Bank to avail US dollar swap facility
  • RBI offered 90-days extension to SIDBI for the 90-day term loan facilities

The Reserve Bank of India has announced to extend the moratorium on loan repayments by another three months to 31 August 2020. RBI has also cut policy repo rate by 40 basis points to 4.0% and reverse repo rate to 3.35% after an unscheduled meeting of the Monetary Policy Committee. The earlier three-month moratorium on the loan EMIs was ending on May 31, 2020. This makes it a total of six months moratorium on loan EMIs starting from March 1, 2020. The extension of a three-month moratorium on repayment of term loans by borrowers means that they would not have to pay the loan EMI installments during the moratorium period. 

The extension will provide relief to many individuals, especially the self-employed, as they would have found it difficult to service their loans such as car loans, home loans etc. due to loss of income during the lockdown period from March 25, 2020. Missing an EMI payment would mean risking adverse action by banks which can adversely impact one’s credit score.

Talking about policy rates, a reduction in the repo rate from the existing 4.4% came in a surprise move to support the economy. This reduction in the key interest rate will allow banks more room to lower the EMI burden for their borrowers.

Here are the Big Takeaways:

RBI cuts the repo rate by 40 bps to 4%

Reserve Bank of India (RBI) Governor Shaktikanta Das has announced a reduction in the repo rate to 4% from the existing 4.4% in a surprise move to support the economy. That marked the lowest repo rate – or the key interest rate at which the RBI lends short-term funds to commercial banks – recorded since 2000.

RBI reduces reverse repo rate by 40 basis points to 3.35%

RBI announced a reduction in the reverse repo rate – the interest rate at which the RBI borrows funds from commercial banks – to 3.35% from existing 3.75%.

RBI extended three-month moratorium from June 1 to August 31

The Reserve Bank of India extended the moratorium on payment of loans by another three months till August to provide much-needed relief to borrowers whose income has been hit due to the coronavirus crisis. In March, the central bank had allowed a three-month moratorium on payment of all term loans due between March 1, 2020 and May 31, 2020.

RBI allocated Rs 15,000 crore to EXIM Bank to avail US dollar swap facility

The Export-Import Bank of India provides financial assistance to exporters and importers in order to promote India’s international trade.

RBI offered 90-days extension to SIDBI for the 90-day term loan facilities

The central bank offered 90-days extension to SIDBI for the 90-day term loan facilities in order to provide additional liquidity support to the MSME sector.

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