Coronavirus Crisis: Banks Are Now Free To Defer Loan Repayment For 3 months, Says RBI

The Reserve Bank of India has asked all banks and other money lending institutions to allow a 3-month moratorium on all kinds of loans. The aim of this move is to mitigate the effect of the COVID-19 pandemic on businesses and employees in the country. RBI also informed that moratorium on term loans and deferment of interest payment will not lead to asset classification downgrade.

Now that the RBI has given a nod to defer loan repayment for 3 months, it is up to the banks to pass on this benefit to its customers. As we know, the ongoing coronavirus crisis has caused many people to lose their jobs or bear salary cuts.

The RBI also announced that banks and other lending institutions were now allowed to defer interest on repayment of working capital by 3 months. It also allowed the banks to reassess the working capital cycle and mentioned that they will not be treated as non-performing assets.

In the context of the recent YES bank crisis, Shaktikanta Das said that the Indian banking system was “safe and sound.”  He assured depositors of commercial banks need not be concerned about the safety of their money. He said “Do not resort to the panic withdrawal of deposits from private banks, your money is safe,”

In a meeting held recently, the monetary Policy Committee of the apex bank made a decision to cut the repo rate by 75 basis points (to 4.4 percent). Moreover, the reverse repo rate has been brought down by 90 basis points. The RBI Governor called the current situation ‘extraordinary circumstances’ and said that the committee voted for a considerable reduction in the repo rate in order to revive growth, mitigate the impact of COVID-19.

A day before this decision, the government announced a relief package worth 1.7 lakh crore rupees to help the most vulnerable communities including poor people, women, and employees to cope with the coronavirus breakout.

A medical insurance cover of Rs 50 lakh (per person) was also announced for healthcare workers, doctors, nurses, paramedics, and sanitation workers.

The latest decision by the apex bank will offer a huge relief to people and businesses that are facing a big challenge in the wake of the lockdown.

You Might Also Like