The Reserve Bank of India (RBI) may have announced a moratorium of three months on servicing of all types of loans including outstanding dues on Credit Cards by the commercial banks, but 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 installments (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 lakhs with a remaining maturity of 15 years, the net additional interest would be approximately Rs 2.34 lakhs, which is equal to eight EMIs. In other words, if customer defers three EMIs then they will end up paying 8 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 installments and interest/EMIs on term loans falling due between March 1, 2020 to May 31, 2020 and extended the repayment period by 3 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.
However, it has been not made clear by PSBs other than the SBI that deferment comes at a cost. This 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 blow 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.
Among the private sector lenders, HDFC Bank and Axis Bank said they have been examining the RBI measure and will inform customers soon.