The suspension of three-month EMI payments may not lead to significant gains for borrowers, as they will charge interest for the moratorium, according to the moratorium announced by state banks. Last Friday, the RBI announced that all term loans, including retail and crop loans and working capital payments, will fall under the three-month moratorium. Banks now have the freedom to set working capital limits, with RBI saying that no payment failure should be considered a default and reported to credit reporting companies.
It seems to be a double blow to the borrowers, because on the one hand, the income has been hit as a result of the pandemic of COVID-19 and on the other hand, there is a threat of more tenure if they opt for an RBI emergency measure. In a letter to customers, the country’s largest lender, State Bank of India, said that “interest on the outstanding part of the term will continue to rise during the moratorium of payments”.
The accrued interest is collected by the lender in the form of additional EMIs from the borrowers who opt for a three-month deferral. SBI explained the financial burden using an example, saying that for a home loan of Rs 30 lakh with a remaining term of 15 years, the net additional interest would be approximately 2.34 lakh, equivalent to 8 EMIs for borrowers who choose moratorium.
Likewise, it said, “for a car loan of Rs 6 lakh with a remaining term of 54 months, the additional interest payable would be Rs 19,000 approximately equal to 1.5 EMIs.” He further said that customers who do not want to postpone the repayment of installments or EMI do not need any action and can continue to pay their normal payment.
However, SBI said, “A customer who would like to postpone recovery from EMI when collection of such delivery is made through the National Automated Clearing House (NACH), submit an application along with the NACH Extension mandate to stop NACH for this installments by e-mail to the specified e-mail ID ”.
SBI has compiled the list of emails for sending the EMI deferral application. Release of Frequently Asked Questions (FAQ) The Indian Banks’ Association (IBA) said that borrowers whose income has not been affected must pay their EMIs on time.
“You can use the benefits of this (RBI) package if your cash flows are disrupted or if you lose income. However, you should keep in mind that the interest on the loans, although not required to be paid immediately and delayed by 3 months, continues to increase in your account and entail higher costs, ”said IBA, an association of banks.
To give you an idea: ‘Suppose your outstanding loan is Rs 1.00,000 and you are charged 12 percent interest on your loan, you owe Rs 1,000 as interest each month. If you choose not to pay the interest every month, you will owe 12% interest per year and consequently pay Rs 3,030.10 at the end of the third month. ”
Likewise, if the interest is 10 percent, you’ll have to pay Rs 833 per month, or Rs 2,521 after three months, it added. Regarding credit card fees, IBA said, there is a requirement to pay a minimum amount and if it is not paid, the same is reported to credit bureaus, but for the purposes of the RBI circular the arrears on the credit card account will not be a three-month period reported to the credit bureaus.
However, interest is charged by the credit card company on the unpaid amount. You should check with your card provider whether you receive the interest owed. Although no penalty interest will be charged during this period, keep in mind that the interest on credit card fees is normally much higher than normal bank credit and you should make a decision accordingly, “it said.
PNB Housing Finance said the balance sheet period will increase by three months and that EMIs may increase for customers opting for moratorium. The RBI report said, “The repayment schedule for such loans, as well as the remaining term, will be shifted across the board three months after the moratorium has been granted. Interest will continue to accrue on the outstanding portion of term loans during the moratorium period. ”
Postponed deadlines under the moratorium included principal and / or interest components, bullet repayments, EMIs, credit card fees, the RBI said.
“Credit institutions shall establish a board-approved policy for granting the above exemptions to all eligible borrowers. When a lending institution’s exposure to a borrower is Rs 5 crore or higher, such as on March 1, 2020, the bank will develop an MIS for the exemptions granted to its borrowers, including information on borrowers and credit facilities. about the nature and extent of the assistance provided, “he had said.