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COVID 19: RBI’s EMI Deferment May Come At A Cost

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COVID 19: RBI’s EMI Deferment May Come At A Cost
Yagnesh Kansara - 03 April 2020

Mumbai: Though Reserve Bank of India (RBI) may have announced moratorium of three months on servicing of all types of loans including outstanding dues on Credit Cards by the commercial banks, the deferment of payment will come at a cost. Depositors need to keep this in mind while opting for the moratorium as announced by the RBI.

Following the moratorium announcement public sector banks (PSBs) have sprung into action. PSBs have informed their customers about deferment of EMIs and interest dues, to help their customers who have suffered blow due the coronavirus crisis.

The country's largest lender State Bank of India (SBI) on Wednesday warned borrowers that deferment of equated monthly instalments (EMIs) offered under the RBI's relief package on account of COVID-19 could put an additional cost on them. The lender also advised borrowers to repay their loans if they are in a position to do the same.

SBI said on its website that deferring the EMIs for a home loan of Rs 30 lakh with a remaining maturity of 15 years, the net additional interest would be approximately Rs 2.34 lakh, which is equal to eight EMIs. In other words, if customer defers three EMIs then they will end up paying eight EMIs more.

Last week, the RBI announced a relief package for retail borrowers and businesses, by way of announcing a three-month moratorium on payment of all term loans due between March 1, 2020, and May 31, 2020.

The dispensation is aimed to mitigate the burden of debt servicing brought about by disruptions on account of COVID 19 pandemic and to ensure the continuity of viable businesses.

"In terms of RBI COVID-19 regulatory package, SBI has initiated steps to defer the instalments and interest/EMIs on term loans falling due between March1, 2020 to May 31, 2020 and extended the repayment period by three months. The interest on working capital facilities for the period March 1, 2020 to May 31, 2020 is also deferred to June 30, 2020," country's largest lender said.

Bank of Baroda said it is providing a moratorium of three months on payment of all instalments falling due between March 1, 2020 to May 31, 2020 for all term loans including corporate, MSME, agriculture, retail, housing, auto, personal loans etc in pursuance of the RBI COVID 19 Regulatory Package.

Regarding the same, Punjab National Bank (PNB) tweeted: "Due to COVID-19 Pandemic, instalments or interest due for March, April, May 2020 on term loan and working capital limit stands deferred. Term loan repayment period is being extended by three months accordingly. Contact your branch for further details."

Union Bank of India added, "In case of those who have opted for ECS route for EMI deduction, customers are given the option of availing the facility by informing the branch concerned through mail or other digital medium.”

Among the private sector lenders, HDFC Bank and Axis Bank said they have been examining the RBI measure and will inform customers soon.

"We are actively working towards implementing the requirements of the RBI guidelines on COVID 19 Regulatory Package for offering moratorium on payment of instalments or deferment of interest. The customers would be informed shortly about the details and the manner of availing the option(s)," Axis Bank said in a tweet.

While HDFC Bank said it is studying the notification issued by the RBI and will communicate the details shortly.

Indian Bank in its tweet said, “As per COVID 19 regulatory package of RBI, the Bank allows a moratorium by deferring payment of EMI/Term Loan Instalments & Interest/Interest on Working Capital for three months with effect from March 1, 2020."

Canara Bank too tweeted, "In terms of COVID-19 RBI package, borrowers are eligible for moratorium/ deferment of instalments/EMI for Term loans falling due from 01.03.2020 to 31.05.2020 and repayment period gets extended accordingly. SMS also has been sent to customers to avail the same."


Former US president Ronald Regan once said, “No Lunch in this world is free”. In line with that not a single PSBs except SBI has clearly said that deferment comes at a cost. The deferment can be useful to businesses who have borrowed for their working capital requirement or term loan for some other purposes. However, it will be a low to the retail borrowers of housing and automobile loans. Though only solace for all the types of customers is that if they opt for deferment, their credit score will not be affected for this period.

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