Three-Month Moratorium on EMIs and Rates Cut, Announces RBI

On March 27, 2020, RBI announced a step reduction in repo rate by 75 basis points bringing it down further to 4.4 percent. The bank also announced a moratorium on all loans including home loans approved by any public or private sector bank or financial institution for three months.

The statement released by RVI stated that all commercial 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 payment of instalments in respect of all term loans outstanding as on March 1, 2020. RBI also directed the banks that non- payment should be considered as ‘non- performing asset’.

After PM Modi called for a nationwide 21- day lockdown, the announcement was made in an unscheduled Monetary Policy Committee meeting. The vote regarding the rate reduction won with four members of MPC voting in the favour among six members. Further, RBI also slashed the cash reserve ratio by 200 basis points for one year to boost the liquidity in the country. This step will release Rs 1,37,000 crores worth liquidity among the banks.

RBI governor, Shaktikanti Das stated that the economic outlook globally is uncertain and negative. Financial stability is the topmost priority of the RBI in this crisis. Banks should do all they can to keep credit flowing.
 
Lending incentive to the housing sector
In the circular issued by the bank, it stated that it has now been decided that scheduled commercial banks will be allowed to deduct the equivalent of incremental credit disbursed by them, as retail loans for automobiles, residential housing and loans to micro, small and medium enterprises (MSMEs), over and above the outstanding level of credit to these segments as at the end of the fortnight ended January 31, 2020, from their net demand and time liabilities (NDTL) for maintenance of CRR. The exemption provided will be available until July 31, 2020.

To give a boost to real estate in such difficult times, RBI stated that it has decided to permit extension of the date of commencement of commercial operations of project loans for commercial real estate sector which are delayed for reasons beyond the control of developers, by one year without downgrading the asset classification, in line with the treatment accorded to other project loans for non- infrastructure sector.
 
Benchmark interest rate at 5.15 percent
The RBI announced that they will keep the key policy rate unchanged at 5.15 percent and moved ahead with its accommodative stance to support the economy. In the circular release din February 2020, the MRC said that Economic activity remains subdued and the few indicators that have moved up recently are yet to gain traction in a more broad-based manner. Given the evolving growth-inflation dynamics, the MPC felt it appropriate to maintain the status quo.
 
Stress fund to help 14,000 units in Ghaziabad
Earlier RBI announced the stressed fund to help the projects that are held in various stages of completion. Ghaziabad CREDAI stated that the Rs 25,000-crore stress fund announced by the government is going to help around 40 to 50 projects in Ghaziabad, meaning benefit to 12,000 to 14,000 buyers awaiting delivery of their homes. Developers have been asking for the release of stress fund soon so that they can continue with the completion of the project at the earliest.

The fiancé minister announced that Rs 25,000 crore will be allocated to projects stuck in various stages of completion given the projects are not stuck under any litigation.
 
Lending rate reduced by 0.25 percent in October
To boost the real estate of the country, the RBI reduced their lending rate by another 0.25 percent bringing it down to the lowest it has been in the last six years at 5.15 percent. the banks were, however, concerned that the loan borrowers were not able to enjoy the rate cuts and the RBI directed them to give them the benefit through repo rate lending rate.