The State Bank of India (SBI) clarified on Wednesday that the rescheduling of term loan payments involves additional costs, and those with the ability to make payments should continue to do so. The clarification came after the central bank last week instructed banks to impose a three-month moratorium on term loan repayments to help borrowers mitigate the impact of the Covid-19 outbreak. The deferral of payment applies to payments due between March 1 and May 31.
The bank’s management clarified that the facility would be a deferral of payment rather than a forgiveness, thus incurring costs. However, the additional costs incurred will be refunded during the repayment period. “Any deferral of interest over such a long period of time, if any, will incur additional costs because it is not an interest waiver, but a deferment of interest,” said Challa Srinivasulu Setty, SBI CEO. An example on SBI’s website showed that for a home loan of Rs 30 lakh, with a remaining term of 15 years, the net additional interest accrued as a result of deferral can amount to approximately Rs 2.34 lakh, which is equivalent with eight assimilated monthly installments (EMIs). “If you have the ability and the cash flow to pay, it makes sense to pay this amount to avoid costs. Most importantly, if you want extra cash flow, you can use this facility and it will cost you, “Setty said.
The lender clarified that for those customers who already paid in March and want to use a refund, the facility would also be available. “There are two to three types of customers. There are customers who have given us fixed instructions, he has a loan account with us, as well as a savings and current account with us, his savings account is debited and credited to our loan account every month. We said they should just send an email, we’ll make sure the amount recovered in March is credited to your savings account, ”said Setty.
Another category of borrowers, who have taken out loans from SBI but have an account with another bank, will need some time to terminate the SBI’s automated clearing house (ACH) facility, which is in effect. Customers will have to send to the bank in writing to request a refund, Setty said. “We provided this provision to recover the amount already paid in March. The only challenge is that because we can receive hundreds of such requests and have to do this manually, because the system support staff is not present, it can take 7-10 days for the credit to be granted, ”said Setty.
Last week, the bank also announced an emergency credit line for Covid-related to help stressed borrowers deal with the pandemic outbreak-related financial stress. Setty said the facility has good interest from borrowers. “We are still collecting data on the number of people who have used this facility, but there is a lot of interest from several customers who are expressing their requirement for this credit line,” said Setty, adding that the authority to The facility is sanctioned at the operating level itself and does not need to be submitted to the Credit Committee for approval. The facility is available for 12 months and interest is charged at the marginal cost of loans (MCLR). “After six months of moratorium, they pay in half-yearly installments,” said Setty. He added that the facility, which will yield funds up to Rs 200 crs, can be used anytime until June 30. “If the MCLR is lowered during this period, (the customer) will receive the payment. Our interest is calculated on daily balances, “Setty said.