The Reserve Bank of India (RBI) had granted a moratorium on the Equated Monthly Instalments (EMI) of retail loans, which included home loans. This started from 1 March 2020 and ends on 31 August 2020. This was a measure to help tide over the financial challenges faced by people in the wake of the Covid-19 pandemic who had suffered job losses or salary cuts.
With the moratorium granted by the RBI ending on 31 August 2020, banks are now working on various restructuring options for home loans which will help home loan borrowers to keep paying their EMIs even in the midst of the unprecedented financial challenges.
Some of the solutions being discussed by banks are the following:
Some of the important points to note about the new home loan EMI payment plan are the following:
The interest rates on home loans that have been restructured may be higher. This is because banks have to make an additional 10% provision on restructured loans. This may result in the interest rates on such loans being higher by up to 30 basis points.
Home loan borrowers have a number of options in front of them to choose from after the EMI moratorium ends on 31 August.
For those who have availed the moratorium, they could do the following from 1 September 2020:
It will help to save money in the long term if the additional debt that was incurred due to availing the EMI moratorium is paid off within one year of the moratorium ending. The ideal amount to repay within the next one year would be at least 120% of the EMI that was deferred during the moratorium. By making these pre-payments of EMI regularly, home loan borrowers can save on interest and also cut down otheir repayment tenure.
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