Should You Avail The 3 Month Moratorium ?
April 7, 2020

The Lockdown imposed by the Government to restrict the spread of the Corona virus, has urged the RBI to announce a 3 months moratorium for payment of EMI of all loans and Credit Card bills.

This has been done with a view to help support the economy, to create additional liquidity and to help struggling business avoid a default. With all business activities coming to a standstill the wheels of a recovering economy have come to a halt. Companies have been asked to continue paying salaries and citizens have are requested not to deduct wages of the workers.

Should the moratorium for repayment be availed? Check out the following scenarios listed below to help arrive at a suitable resolution.

For Individuals Who are Salaried

Salaried personnel who are working with prestigious companies, Government employees and persons who are employed with the IT industry and work from home during the lock down period will continue to receive the regular monthly income. The monthly outgoings will be easily affordable so regular payment of EMI’s and credit card bills should be done. Undue advantage taken of the laxity for payments will end up being burden.

Whereas salaried persons who are not so sure of receiving the monthly emoluments or are nervous about job stability should plan the budget for the next few months.

Those who have savings to tide over this period should continue to pay the EMI for Loans and Credit card bills, taking a month off from payment of EMI is a good idea if there are financial constraints.

Self Employed Individuals

Financial planning is an integral part of a business; notwithstanding the scale of operations each organisation has its own running costs.

With the present Lockdown all businesses are affected, only essential services are allowed to function. This standstill point means business owners are going to face the brunt of loss of revenue with overhead costs to bear.

Most businesses work on revolving credit taken from financers: taking the moratorium for official borrowings will be in order. The 3 month moratorium will also give a relief to realtors and real estate consultants.

At the same time personal borrowings like Home Loan EMI’s and Credit Card bills should be paid as far as possible.

What are the choices for individuals having a fixed income or income from Investments?

A large section of our population is dependent on a fixed monthly income either pensioners, with rental income or with income from investments. With the share market at the lowest ebb and mutual funds not declaring dividends this is a time to conserve. Necessary expenditures and contingency planning will take precedence.

It may be some time before the economic upheaval settles and a new normal ushers, to overcome this period of instability request for a moratorium for the repayment of EMI.

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