In a big relief to lakhs of consumers who currently have vehicle loans, the Reserve bank has announced the extension of moratorium on monthly EMIs by another 3 months. The earlier moratorium announced by RBI was to expire on May 31, 2020 but looking at the continued liquidity crunch the consumers are facing owing to the Coronavirus pandemic, the decision to extend the moratorium was announced. Now if consumers want, they can skip their auto loan EMIs till August 31, 2020, which they’ll have to repay at the end of the term loan.
Also read: Coronavirus Lockdown: Skipping Your Auto Loan EMIs May Not Be A Wise Decision
According to RBI, demand compression and supply disruption will depress economic activity in the near future.
Interest will still continue to be accrued over these missed EMIs but the central bank did try to offer some relief there as well. In a statement RBI Governor Shaktikanta Das said,”It has been decided to permit lending institutions to convert the accumulated interest on working capital facilities over the total deferment period of 6 months into a funded interest term loan which shall be fully repaid during the course of the current financial year, ending March 31, 2021.”
The @RBI took key decisions today to improve the functioning of markets, support exports & imports, ease financial stress, & improve debt management. Major decisions include extension of loan moratorium window by three months, (1/2) pic.twitter.com/GW6bnhksJu
— NSitharamanOffice (@nsitharamanoffc) May 22, 2020
In addition to this a reduction of 40 basis points in repo rate was also announced. Society of Indian Automobile manufacturers (SIAM) reacted positively to the news. Rajan Wadhera, President, SIAM said,”It is a welcome step by RBI to support reduction in the cost of borrowing for traders and consumers and hence would positively impact consumer demand. We are hopeful that banks will pass on the benefit and support demand creation for discretionary products, like automobiles.”
The recent announcement by #RBIGovernor on reduction in repo rate will impact the demand stimulus positively.
— SIAM India (@siamindia) May 22, 2020
These measures will come to aid of customers both who have existing vehicle loans and those who are looking to take new loans. With the repo rate now standing at 4% it is expected that banks will offer loans to consumer at lower rates than before. With respect to the moratorium the consumers would still not be classified as ‘defaulter’ despite skipping installments.