FM hails RBI move to allow deferment of EMI, interest payment dates

Our Bureau New Delhi | Updated on March 27, 2020 Published on March 27, 2020

Finance Minister Nirmala Sitharaman   -  PTI

Quick transmission of slashed interest rates is imperative, says Nirmala Sitharaman

Finance Minister Nirmala Sitharaman said the RBI’s announcement to allow a three-month deferment in the payment of EMIs (equated monthly instalments) for term loans and interest on working capital loans will give much desired relief to the common man.

RBI Governor Shaktikanta Das on Friday announced that all ‘lending institutions’ — commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India financial institutions and NBFCs (including housing finance companies and micro-finance institutions) — are being permitted to allow a moratorium of three months on the payment of instalments in respect of all term loans outstanding as on March 1, 2020.


“The three-month moratorium on payments of term loan instalments and interest on working capital (would) give much-desired relief,” said Sitharaman. Moratorium period refers to the time during which borrowers are not required to pay an EMI. This period is also known as EMI holiday. Usually, such breaks are offered to help individuals and corporates facing temporary financial difficulties due to natural or man-made crises.


The FM also emphasised the need for quick transmission of slashed interest rates. The Monetary Policy Committee under the RBI Governor decided to cut the policy rate by 75 basis points. This is the rate at which the RBI lends to banks. There have been complaints that banks do not pass on the benefit of policy rate cuts, while the banks say that out of the total liquidity available, the money raised on repo has a small share. Also, the rest of the money comes from term deposits, which means the cost is high, and it is not possible for them to cut the interest rates immediately.

However, Finance Ministry officials feel that it would be easy for banks to cut the interest rate on loans. Since the RBI has also announced injecting ₹3.74-lakh crore though Targeted Long Term Repo Operations (TLTRO) and reduction in Cash Reserve Ratio (CRR) by 100 basis points, or one percentage, banks will have ample liquidity, that too at lower cost, and this will help in quick transmission, officials said.

Economic growth

Sitharaman also took note of Das’ statement on economic growth. According to the RBI Governor, it is worthwhile bearing in mind that India’s macroeconomic fundamentals are sound and, in fact, stronger than what they were in the aftermath of the global financial crisis. The fiscal deficit and current account deficit are now much lower, inflation conditions are relatively benign, and financial volatility measured by change in stock prices from recent peaks and average daily change in the exchange rate of the rupee are distinctly lower, he observed. “Covid-19 is upon us; but this too shall pass. We need to remain careful and take all precautionary measures,” he said.

Meanwhile, Financial Services Secretary Debashish Panda, in a tweet, urged people not to pay attention to rumours on the closure of bank branches. “Customer service bank branches are operational and will continue to provide services. Sufficient cash across branches & ATMs! Don't trust rumours of branch closures! Customers requested to stagger arrival at branches etc,” he tweeted.

Published on March 27, 2020

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