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Following the Reserve Bank of India (RBI) directive to banks on 27 March to provide a three-month moratorium on repayment of term loans, most public sector banks on Tuesday announced their decisions regarding the same on social media platforms such as Twitter.
The countries’ biggest lender, State Bank of India, tweeted “In terms of RBI COVID19 regulatory package, SBI has initiated steps to defer the installments and interest/EMIs on term loans falling due between 1 March 2020 to 31 May 2020 and extended the repayment period by three months.”
Many other PSU banks such as Bank of Baroda, Punjab and Sindh Bank, IDBI Bank, Canara Bank and others have informed their customers about the EMI moratorium. Most of the banks have come out with detailed FAQs to bring clarity on how it will work.
Banks are following different processes with regard to availing the facility of EMI moratorium. For example, SBI has chosen the ‘opt-in’ route where those who want to avail the moratorium will have to inform the bank. IDBI Bank has chosen the ‘opt-out’ route where those who don’t want the moratorium will have to email the bank ([email protected]) by 3 April. Canara Bank has asked its customers to send a “NO” to the number “8422004008″. Canara Bank customers can also email their details to [email protected]. Customers will have to check with the respective bank for the details.
Let’s understand what SBI customers have to do to avail the facility, the cost attached to it and other details.
Inform through email
SBI has informed customers if they don’t want to avail the moratorium, no action is required from their end. However, those who want to avail the moratorium will have to send an application to the bank through an email. Here is the link to the form (https://bit.ly/2UUEorp) and the list of email id (https://bit.ly/3bJc4yK) as per the region where you need to mail the application form. You will also have to attach a NACH/ECS mandate extension form (https://bit.ly/340Q2VG) with your application.
Loan tenure gets extended
If a person avails the moratorium, the loan tenure will get extended by 3 months or 90 days over the original repayment tenure. So for example, if your loan was maturing on 1 March 2025 then now it will mature on 1 June 2025. Some of the customers might have already paid their March installments, so in effect the loan tenure will only get extended by two months. But some banks may give a breather. For instance Bank of Baroda has said that the bank will refund the March installment. You should therefore, connect with your bank for clarity.
Cost
As per RBI’s notification, SBI has further clarified to its customers that the interest will continue to accrue over the moratorium period and it will increase the cost. SBI has explained it with an example on its website. For a borrower with a loan amount of ₹30 lakh with a remaining maturity of 15 years, the net additional interest would be around ₹2.34 lakh (equal to 8 EMIs) if a person opts for the moratorium. SBI is currently charging an interest of 7.20% for a ₹30 lakh loan.
The cost will be recovered post the moratorium is over, so you will end up paying higher EMIs. You will have to connect with your bank for the revised repayment schedule which will show you your revised EMIs.
Impact on credit score
As per the RBI notification, there will be no impact on the credit score of the borrowers for availing the moratorium facility.
As different banks are following different methods, both who want to avail the facility and those who don’t want to avail the facility should connect with their respective banks for clarity. Check your bank’s website for details or connect through email or phone for clarity.
