The mega relief package announced by the RBI on March 27th, 2020 has come as a huge relief for retail borrowers. The benefits range from policy rate cuts where the repo rate is being reduced by 50 basis points to a moratorium on all term loans including home, auto, education, personal and credit card dues. Apart from a reduction in the repo rate, the RBI has also cut the cash reserve ration (CRR) by 100 basis points. The repo rate cut will be especially beneficial to borrowers whose home loans are linked to repo rates.
However, lenders are still not decided on whether the moratorium will be available to all borrowers by default or whether they will be given the option to decide.
Experts are advising that retail borrowers who have the capacity to meet their EMI commitments on home loans should continue to do so. This will ensure that they can prepay loans ahead of schedule and save on interest payment due to the drastic reduction in rates. Borrowers must understand that a moratorium does not translate to waiver.
While moratorium has also been made available on credit card dues, credit card users should also strive to clear their bills as interest costs will balloon as this is considered an unsecured loan.
Retails borrowers should take advantage of these policy announcements and plan their schedule. It is encouraged to negotiate with their existing lenders to ensure they have the best possible rates and if not satisfied, they can look at changing their lender.
The RBI has given borrowers who are unable to pay their loans in the near future, a lifeline in this times of financial crisis.