RBI’s ‘Bazooka’ boost to middle class: Your EMIs deferred for 3 months, all of them
2 min read
In an unprecedented decision, the Reserve Bank of India (RBI) offered a massive relief to the middle class population and Micro, Small and Medium Enterprises (MSME) by offering a 3-month moratorium on loans with immediate effect. This bold decision is expected to help fight immediate cash crunch in the economy in wake of the nationwide lockdown in India effectuated by the Corona virus pandemic.
The RBI has also cut the Repo rate by 75 basis points to bring it down to 4.40% and and the Reverse Repo rate by 90 bps to 4%.
What it means for you
- RBI governor Shaktikanta Das announced in a press conference Friday that the banks and lending agencies can defer EMI payments for three months.
- The RBI has clarified that the moratorium has been offered on all term loans as on March 1, 2020. All retail loans and EMIs are covered by the 3-month moratorium.
- The deferment of interest payment will not result in asset classification downgrade.
- The announcement includes all such banks including SCB, LAB, SFB, RRBs, NBFCs and HFCs. These financial institutions can now allow a moratorium of 3 months on payment of installments as of March 1, 2020.
- Expect interest on Housing loans to come down
This is a major, major decision that will not only help the working class in tiding over the liquidity crunch in the short run but shall also de-stress the market sentiment, which has taken a hit due to the crushing economic blow delivered by the Wuhan flu.
Bankers and economists have hailed the move by RBI as timely and bold. Sajid Chenoy of JP Morgan said the RBI has unleashed a “Bazooka”. Das said, “RBI will continue to remain vigilant and take whatever steps are needed. All instruments conventional and unconventional are on the table.”
The RBI has unleashed a Bazooka
Sajid Chenoy – JP Morgan
The State Bank Of India, which is the largest nationalized bank is expected to pass on the benefit to its customers following the RBI’s announcement. It remains to be seen, however, if the private banks are as enthusiastic in deferring the EMIs in these desperate times.
