What Impact would Extended Loan Moratorium have on EMIs?

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In order to give the much-needed relief to the public, the Reserve Bank of India (RBI) had recently announced that the loan moratorium is extended by further 3 months, i.e. till August 2020. This is to help them while the financial disturbance due to the COVID-19 crisis. Here, the loan moratorium means the relief to repay the loan post the due date.

So, it’s worth knowing what impact would this Extended Loan Moratorium has on the future EMIs of the loan borrowers.

Let us carefully understand what effect will be there on loan moratorium as RBI extends moratorium by 3 months:

 

Overall impact of Extended Loan Moratorium on EMIs

To understand the overall impact on loan EMIs as RBI extends moratorium period, we must look into this case study:-

Suppose, M takes a loan of ₹50 lakh at 8.5% for 20 years during the month if May 2019.

Here EMI will be = ₹43,391.

  • Now, M takes advantage of the extended moratorium and skips 3 EMIs.
  • Resultantly, the unpaid interest amount compounds to add 11 extra EMIs in the loan term.
  • So, the total cost of opting moratorium in India and missing 3 EMIs of ₹43,391 each will add up to ₹4.48 lakh.

We can understand this with the help of the chart given below-

Remaining loan term (years)

Extra months

Extra interest burden ()

3

1

34,133

5

2

61,870

10

4

1,54,045

15

7

2,91,373

19

11

4,48,280

The overall impact of the extended loan moratorium will become bigger with the greater loan tenure. We see that the overall cost of opting moratorium in India will increase with the longer loan term.

However, besides the loan moratorium extension, the government has already extended the due-date of ITR filing. The ITR filing till 30th November 2020.

Income Tax Return Filing Due Date for FY 2019-20 Further Extended

 

If you require any other sort of guidance with regard to the income tax return filing procedure, please feel free to contact our business advisors at 8881-069-069.

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