How the Lockdown Moratorium Calculation Works?

At the time of Corona Pandemic, RBI has instructed the Financial Institutions to supply the moratorium to their customers. Now how this Moratorium will affect the loan tenure and also loan repayment amount.

As every EMI has two components, first is principle and second is interest. Now when one EMI is paid, the outstanding loan reduced to the extent of the principle component which is there within the EMI. Now, In Next EMI the interest component are going to be lesser and principle component are going to be above the preceding EMI.

If we avail the moratorium of three months, Interest of the subsequent 2 months of moratorium are going to be an equivalent because it was for First EMI which we’ve deferred.

 Let’s know it with and Example Mr. Batra Has availed a loan against property of 20,00,000 Rs. @ 10% ROI for 60 months. He has got to pay the interest of 5,49,675 Rs for the loan tenure of 60 months. His Ist EMI debited on 1 Jan 2016. Now he has availed the moratorium. His EMI for Mar 20, Apr 20 and May 20 is 42495/- and therefore the Interest component for these 3 months consecutively is 3384, 3058 and 2729 Rs.

 After choosing the moratorium from Mar 20 his principle outstanding is 406066/- Rs. Now If he has opted for the moratorium for 3 months than his cumulative interest for 3 month is 10,152 Rs. His Total POS is now 4,16,218 Rs. (406066 Rs. + 10152) Rs.

After restructuring  his loan his revised tenure would be 60.26 months. Since the inception of his EMI till Feb 20, he has paid 50 EMI’s and 10 EMIs are left to be paid.

But after the deferment of three EMI’s his residual tenure has increased by 0.26 months or 7.8 days. It means he has got to pay the EMI of 42495 Rs for next 10.26 Months now.

Total interest after restructuring of his loan, the entire amount he has got to pay is 5,50,578 Rs. The additional amount of 11048 Rs  (0.26* 42495 Rs.) he has got to pay now. The additional payment of his loan after deferment is (5,50,578 Rs – 5,49,675 Rs) 903 Rs.

In this additional amount of 11048 Rs the interest component is 903 Rs. So Finally, He has got to pay the quantity of 903 Rs as Interest and 10,045 against the extra principle.