What are the effects of RBI measures on your Home Loan EMIs

The effects of Covid-19 are faced by all and sundry and the loan holders are facing a daunting task of paying EMIs in time. Most of the Governments and Central Banks have come forward and announced number of measures to help their citizens and the Indian Government and Reserve Bank of India (RBI) are not behind. Both of the them have announced several measures to address the needs of the poor and needy and also of the middle class.

What aremeasures announce by RBI?

RBI has announced several measures, but I am looking at one particular step which is relevant for the home loan EMI payers. Reduction in Repo Rate by 75 basis points or 0.75%. RBI expects that this rate cut will be passed on to the customers immediately by the commercial banks. In addition, most of the banks have announced the EMI holiday for three months.

What does this mean?

Rate of Interest
It’s very simple. If your home loan is at 9% when you signed up, now with immediate effects it should become 8.25%. When I was talking to few friends with home loans, only one of them confirmed the full reduction of 0.75%. There is a possibility that banks may not pass full benefit to the consumers though RBI and the Government will look into this issue seriously.

EMI Holiday
It also means you don’t need to pay EMIs for three months.
There is a confusion, as to which EMIs? I mean, is it for the month of March, April and May or April, May and June.
Please note that the banks generally will ask you about the date of the EMI and in general they would agree to a date pickedby you. One of my friends told that his EMI was promptly debited on 25th March, (note RBI announced measures on 27th March 2020). In nutshell, you will get EMI holiday for 3 months and that will in most of the cases April, May and June 2020.

What happensduring the EMI holiday months?
Postponement of EMIs doesn’t mean that the interest won’t accrue; you will still pay interest on the outstanding principal. Only benefit is that you don’t have to pay EMI and non-payment of EMIs won’t affect your credit score.