3 months EMI Moratorium benefit – Why you should NOT opt?

Today, there was a news about 3 months moratorium (which means a temporary relief) benefit on all kind of loans and how investors won’t have to pay their EMI for 3 months. However it was celebrated by investors without understanding it fully.

So I thought of clarifying some doubts regarding it and to share with you that it’s actually not a very big benefit and why most of the investors should not OPT for it.

Let me clarify on what is the EMI moratorium meaning and how does it apply to you?

Meaning of EMI Moratorium

A lot of people in our country might get impacted due to coronavirus and this 21 day lockdown and their incomes and salaries might get impacted. A lot of people may find it very tough to service their EMI on time and there was a need of the hour for some relief. Hence govt has given permission to banks, NBFC’s and housing finance companies to consider an EMI moratorium and pass on the benefit to the customers

Which simply means that it’s not a forced rule, but only a permission given to banks if they want to do it. RBI will not count those missed EMI payments as “defaults” and not count it as NPA (non-performing assets) and also directed banks to not report it to CIBIL and other beaureu

Now it’s up to bank on how they would like to implement it. Banks might pass on the benefit to ALL or some customers. Here are the exact RBI notification wordings you might want to read.

Will your EMI deducted stop ?

No, looks like you will have to apply for this benefit in case you wish to and only when you apply for it, the EMI will then not get deducted. If you just don’t take any action, then the EMI may get auto deducted as always.

A guy names Siddharth told me on twitter that his bank might deduct the EMI (will not pass the benefit) if salary is credited in the account. Here is the conversation snapshot

EMI moratorium clarification

As I said, this will only happen if you get this benefit from your bank and bank agrees for it. Checkout the tweet below where an investor asked his bank about it and bank person told that it might not be applicable to him if he gets the salary.

Will I pay any interest for those 3 months of moratorium ?

A lot of investors are showing their happiness about this RBI notification and feeling like they are getting some very big benefit. However in reality it’s opposite and it’s suggested for you to NOT take this benefit.

If someone takes this moratorium benefit, they interest will be accruing on the outstanding balance and you will have to pay the interest at the end of 3 months. Their EMI will start getting deducted after 3 months.

What it means is that assume someone has a 30 lacs of home loan, and an EMI of 30,000 (just a random assumption) and interest rate is 8% , then one month interest will be Rs 20,000 (30 lacs * 8% = 2.4 lacs yearly .. Divide that by 12 to get monthly interest = 20,000)

And for 3 months, it will be Rs 60,000 additional simple interest. This additional interest will be added to your outstanding balance and your tenure will go up.

Same is true for outstanding balance on credit cards.

The only benefit you will get here is that you will not be paying any kind of penalty and it won’t be reported to CIBIL.

Update from various banks

Here is a notification from SBI bank and ICICI bank to its customers that interest will still be charged on the outstanding balance if one wants to avail this benefit.

Most of the banks have also clarified that to take this benefit, one has to contact the bank and ask for this benefit. If you don’t take any action, then the EMI will get deducted as usual.

Should you opt for EMI Moratorium benefit?

By now, you must have understood that this benefit is not for someone who is not facing severe financial crunch or whose income/salary is going to go down due to coronavirus impact. So if you can easily pay off your EMI’s, then please do so and don’t opt for this moratorium benefit.

It’s only for someone who is going to see salary loss, job loss and is facing very hard time financially due to this lock down. They are getting TIME from bank side and nothing else.

Do let us know what you feel about it in comments section.

Will your insurance company cover Coronavirus (Covid-19)?

As I write this, Coronavirus is already spreading in India and there have been 148 positive cases in India. 3 people have died.

Coronavirus is spreading across the world and has killed so many across the world (especially China, Italy, Iran, and Spain). A lot of us have bought life and health insurance policies and the natural question you might have is “Does my insurance company cover coronavirus?”

And the good news is the answer to that is “YES”. I also called up the customer care of my term plan and health insurance companies and got a confirmation in audio format which is there below if you want to listen to it.

Almost every life insurance and health insurance policy will be covering coronavirus related claims and policy holders don’t have to worry about it. Even IRDA has issued a guidelines against coronavirus and how insurance companies should deal with it in its recent circular

IRDA circular on coronavirus (covid-19) for insurance companies

Life Insurance & Coronavirus (Covid-19)

I just called to the customer care of the insurance company from where I had taken term plan and they told me clearly that the entire claim because of coronavirus will be paid and we do not have to worry about it.

Here is a clarification from Aviva Life Insurance on Coronavirus coverage

Death from these kinds of natural calamities and illnesses are covered in life insurance. So if you have a running life insurance policy, you should not worry about it at all. The claims will be paid

Health Insurance & Coronavirus (Covid-19)

Even in health insurance policies, the claims against expenses for coronavirus treatment and quarantine will be covered. However, when I called my health insurance policy company, they told me that while the treatment in recognized hospital will be surely covered just like other illnesses, the treatment at home will not be covered (this was Religare Care)

Here is a clarification from the customer care of Religare


One of my teammate at the office have the policy with Birla Sun life and they got an SMS which clearly told them that they need not worry about it and its covered. Here is the snapshot of the message –

Coronavirus is covered by health insurance companies

So, I think you should not worry at all about its covered by your health insurance company, however, you may want to call your company customer care number and verify in case you want to be double sure about it.

Get clarity from your Insurance company

Only the active insurance policies will be cover coronavirus related claims. If someone is in between the purchase of the policy and gets the virus, the policy might not cover it. Please get clarity on this from insurance company. Also on some articles, I read that some health insurance companies may not cover a disease that is declared as an epidemic or pandemic by the World Health Organization (WHO).

So to be double sure about it, it’s better to go through your policies and check this on your own with customer care.

Do let me know what you think about this matter and if you have any more questions.

2 big reasons why markets are falling?

Sensex is down by 7.96% today

In the last 1 month alone the markets have corrected by 23% and it was one of the fastest and steepest declines ever in the history of stock markets in India (and globally)

sensex crash 2020

A lot of equity investors are very new to this game and many might be wondering what is going on and why markets are falling?

So in this article, I will just jot down 2 big reasons which are contributing to this steep fall.

Reason #1 – Fear and Panic because of Coronavirus

The biggest reason and the trigger of this huge market falls from the last 1 month is because of the coronavirus.

The entire world is fearful about the spread of this virus and its impact on the world.

In the entire world, the businesses are hugely impacted because of coronavirus. Because of this virus and the fear around it, various factories are shut down and work is stopped. Other companies which needed raw material are not getting it and production is down. Overall manufacturing is HIT.

Which also means that consumption is down and will be down in the near future also and it will only go up slowly over time.

Impact of coronavirus on business globally

One very simple example is APPLE. Its products get manufactured in China and because China factories is shut down, the apple stock is down because it’s going to hit their profitability.

One more way of understanding coronavirus impact on business is simple meat/poultry businesses especially in India. The demand for Chicken/mutton or other similar items have drastically gone down. No one is buying it. Now imagine the job losses, no sale of associated products like poultry feeds by poultry farms..

Another example is the tourism industry. People are not going on vacations, or booking very less flights, etc. which is directly going to impact so many companies on at a deeper level.

So in general various businesses around the world are impacted and as you might be knowing stock markets chase earnings. Because the future earnings of companies across the world are going to be impacted, the stock markets are just reflecting that today.

Markets are desperately looking for news where we develop some medicine or vaccine for coronavirus which gives some kind of assurance that we will be able to control this virus and further damage.

Reason #2 – Crude Oil Price Crash

Crude oil in international markets has crashed badly.

The oil price was a few days back fell by almost 30% in one single day and hit around $30 per barrel (Oil price in 1947 was $28 per barrel)
Crude Oil Crash

This was $120-130 around 10 yrs back and just 2 yrs back it was in $60-70 range.

The huge drop in oil prices also indicates huge slowdown and low demand, even though it’s amazing news for India because we import oil and it’s going to save us billions of dollars in oil bill.

Why is it happening?

Well, its extremely complicated thing for a retail investor like you and me, but for now you should know that there is a price was going on between Russia and Saudi Arabia which has triggered this oil crash. Russia did not honor its promise as per its OPEC promises and now Saudi Arabia is kind of punishing it for going against OPEC and have crashed the prices which as per some analyst is not going up very soon.

You can either read this article or watch this excellent YouTube video to understand about oil crash.


For the last many months, there was a correction expected but the sudden rise of coronavirus has added a new level of fear among investors and the crash happened before people even realize what is happening.

Markets have corrected by a good margin and now we have officially entered into a bear market (above 20% fall is bear market). While no one can catch the bottom and can’t guarantee that more down fall cannot happen, this is surely not the time to sell off your long term money. If it was your short term money, it should not have been there in equity markets at all.

One of the suggestions right now would be to partly invest some money which you don’t need for the next 8-10 yrs and be ready with some cash incase the market falls further from here.

Disclaimer: This is a highly complex topic and I do not claim to be an expert on this matter. I have shared my opinion and my limited understanding, so please feel free to correct me on any point.

Is it really worth saving small amounts like Rs 2,000 per month?

A lot of young investors are often confused if it’s really worth saving small chunks of money in the start of their careers?

A lot of investors don’t save enough at the start of their career and wonder if they should start saving only in the future when they are able to save a “respectable” amount like Rs 10,000 or Rs 50,000 a month?

Today I want to let you know why small savings matters!

The #1 benefit of small savings

Does it really matter in long run if you save Rs 2,000 per month for a few years? Even if you do it for 3 yrs, you will just have Rs 60,000-70,000 with you. It’s not a big amount of money.

A lot of people might be able to put a big lump sum in one go to compensate for the pain of taking the effort of saving a small sum of money each month. On top of it, if you ignore saving a small sum of money for a few years, your final wealth will not be drastically different had you saved small amounts.

What you just read above is what a lot of investors think about small saving. It’s a classic mathematical way of looking at it.

However I often tell people that it’s not about the amount, but about the HABIT OF SAVING MONEY.

Cultivate the Habit of Saving

When you start your investments and start investing per month, the bigger benefit is that you are forcing yourself to take out a chunk of your monthly income and invest it somewhere.

You are actually developing the HABIT of saving on a regular basis, which is not an easy thing to achieve.

habit of saving

Today, a lot of investors are earning good amount of money and they also have a decent surplus, but what is missing is the habit of saving. They have never done it before in life for many years, and now when suddenly they are having surplus which potentially can be invested, they are finding it tough to do that, because they are not able to control themselves with the distraction this world offers them.

Imagine two kids, one of them always saves 5% of his pocket money and spends the rest. Another one spends all his pocket money. This continues for 15 yrs of their life. You can imagine what will be the psychology of both the kids and how it will impact their future.

The same is true for investors after they start their career and earning life.

Small savings compounds and boost your wealth in the future

Small savings might not look big enough at the start, but over the period of time, they compound well and adds to your wealth creation, sometimes big and sometimes small.

So let’s imagine that your future saving scenario looks like this

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Year The amount you will save per month
First 10 yrs Rs 2,000 for 3 yrs, then Rs 3,000 for 3 yrs, then Rs 5,000 for 4 yrs
Next 25 yrs Rs 20,000 per month (increasing with 8% per year)


Given the scenario above, imagine two cases

  • Case 1: You invest in first 10 yrs – Small savings done
  • Case 2: You DONT invest for first 10 yrs – No small savings done

If you add up all the money which you invested from your pocket in CASE 1 and Case 2, you will find out that the difference is just 2.4%. Yes, incase 1, you will invest 1.77 cr and incase 2, it will be 1.73 cr. Hardly any difference you will say

But when you find out the difference in the wealth created at the end in both cases, it will be a gap of 16%. In the case of Case 1 you will make 7.98 cr, whereas in case 2, you will have 16% less wealth. That’s a decent amount of money.

Below you will see the wealth difference in both the cases.

Impact of small savings in long term

The above example tells us that if someone is not saving small chunks of money just because they feel it will not be worth it, it’s not the right way of looking at it, because in the long term it will surely help in boosting the wealth one will create.

Small savings also help you in dealing with emergencies

Another benefit of saving small amounts at the start and not waiting for the “right” time is that one will at least start having some amount for emergencies. In our example above, if one invests even small amounts for the first 10 yrs of life, they will have a sizeable amount of Rs 7.2 lacs at least.

This is not a small amount. It can help the investor in dealing with any kind of emergencies. One can even avoid taking loans for things like buying a car, vacation or home appliances.

If nothing happens, it will give a nice feeling to the investor and boost his confidence that it is possible for him to create wealth. Remember to create 1 crore, you need to create the first 10 lacs and to do that you need first 1 lac.

You have to start somewhere.

Don’t delay your investments, else it will cost you later

The more you delay investing, the more you will have to invest in the future to cover up the short fall. Here is a small example I want to share with you

If you invest Rs 10,000 per month for the next 30 yrs (assuming a 12% return and 7% increase in SIP per year), you will be able to create 5.36 crore in 30 yrs.

Do you what happens if you delay by just 5 yrs? In that case, you will create only Rs 2.78 crore. Yes, Only 2.78 crore against 5.36 cr.

And now if you want to reach the same corpus of 5.36 cr, you will have to start with the SIP of Rs 19,300

Cost of Delay Calculator

Below is a simple cost of delay calculator where you can try out different scenarios for yourself and see what will be the impact of delaying the investments.

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Start Small – It helps you in building the habit of saving

To conclude I would say, starting small has its own benefit. It will develop your habit of savings. If you can’t save Rs 2,000 at the salary of Rs 30,000, it will be equally tough to save Rs. 20,000 at the salary of 1,00,000.

“Investing” is more about your own behavior & not external factors.

Do let us know what you feel about this article? Do you know someone who has been delaying their investments (are you one of them?)