EMI Moratorium: Should you opt for this bank offer until it's necessary? See experts' calculation

EMI Moratorium: To provide relief to the retail loan borrowers, especially home loan and auto loan borrowers during the Coronavirus lockdown, the RBI offered EMI moratorium for three months that the majority of the banks have implemented. However, it has been found that those people who are able to pay the EMI are also opting for this option hoping the bank is offering moratorium on both principal and interest rates. According to the tax and investment experts, the banks are offering EMI moratorium only, the interest incurring during this waiver period will continue, which means after the three month EMI moratorium, the loan period will get elongated by three additional months and hence there will be an additional three-month interest will get accrued on the loan borrower.

Speaking on the EMI moratorium and the interest accruing during the moratorium period of EMI Punjab National Bank has cleared the air on its website in question and answer format citing, "Interest shall continue to accrue on the outstanding portion of the Term Loan during the moratorium period." The Punjab National Bank further clarifies that as per RBI’s guidelines, Banks will grant a moratorium of 3 months on payments of all term loan installments falling due between March 1, 2020 and May 31, 2020 citing, "The accumulated interest shall be recovered immediately after completion of moratorium period of 3 months."

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Giving detailed arithmetic behind this EMI moratorium and how much additional money a loan borrower will have to pay after availing of this EMI moratorium Jitendra Solanki, a SEBI registered tax and investment expert said, "Banks have announced deferment of the EMI for three months. It doesn't mean the interest won't accrue on the outstanding loan amount." Giving an example for a home loan borrower who has availed Rs 30 lakh loan from a bank Solanki said, "If a home loan borrower who has vailed of Rs 30 lakh home loan from a bank and he or she decides to avail of the EMI moratorium for three months, then his or her interest accruing during these three months will be Rs 17,000 to Rs 18,000 depending upon the kind of bank the loan borrower has chosen."

Similarly, giving his arithmetic for the car loan borrowers who have availed of Rs 5 lakh car loan from a bank Solanki said, "If a car loan borrower who has taken Rs 5 lakh car loan, he or she will have to pay an additional Rs 7,000 to Rs 8,000 interest after availing of the EMI moratorium." Solanki said that EMI moratorium offer is good for only those people who are facing financial crises like salary cut or delay in payment, etc. and they can't afford to pay their EMI on time. Those who are able to pay their EMI shouldn't stop their EMI.