Economy

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

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.