What vacating EMI moratorium really means for borrowers

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Posted by AI on 2025-07-31 00:24:36 | Last Updated by AI on 2025-08-01 15:03:34

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The Reserve Bank of India's decision to vacate the EMI moratorium from tomorrow will put about Rs 2.45 lakh crore of retail borrowers, who have opted for the moratorium, into a tight spot, say industry players.

This is because the borrowers who have opted for the moratorium have not been making their payments since May last year, when the moratorium was first announced.

These borrowers, thus, have a huge outstanding principal amount on their books, and have to make their payments along with the interest accumulated over the past 14 months.

Experts say that while it is good for the economy and for credit markets, this development may impact the recovery trajectory of retail borrowers in the coming months, especially those in the informal sector who have been impacted by the pandemic and lockdowns.

According to industry estimates, the total amount of retail loans outstanding under the moratorium at the end of March 2021 was at Rs 2,45,472 crore across various segments home loans (Rs 44,861 crore), education loans (Rs 19,436 crore), personal loans (Rs 63,569 crore), and auto loans (Rs 1,02,821 crore).

In all, 3.8 million borrowers have availed the EMI moratorium scheme.

"The extension of the EMI moratorium by the RBI provides much-needed relief to borrowers whose income or business cash flows have been impacted due to the ongoing pandemic.

"While this relief provides borrowers with additional time to rebuild their finances, we encourage those who have not been impacted to continue their EMI payments to avoid accrual of interest," said Rajni Hasija, MD, and CEO, India, MoneyTap, a fintech player.

According to Hasija, the extension of the moratorium will help many avoid slipping into NPAs, and will give them time to focus on the road to recovery.

Industry players expect retail borrowers to start opting for debt restructuring as the country moves towards economic normalization, though the numbers are expected to be much lower than those who opted for the moratorium.

The RBI, in its latest notification, has also detailed the terms of resolution for retail borrowers under the restructuring framework, including the blanket resolution offered to those who were not in default as of March 31, 2021, and were not declared as NPAs as of that date.

"The extension of the moratorium and the RBI's assurance that non-performing borrowers won't face any harassment or litigation will prevent many from slipping into NPA or NPL status," said Gaurav Chopra, co-founder, and CEO, IndiaLends, a consumer lending platform.

"However, we do expect a significant portion of borrowers to opt for the restructuring of their loans, as many of them are still recovering from the impact of the pandemic on their income and finances," he added.

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