SBI, BoB, HDFC, ICICI Bank Allows 3-Months Delay In Loan EMIs; But You Need To Pay 3-10 Extra EMIs! (Find Out How)

According to the moratorium scheme announced by state-owned banks, the three-month suspension of EMI payments may not result in significant gains for borrowers as they will charge interest for the moratorium period. 

How Did This Happen?

The RBI had announced that all term loans, including retail and crop loans and working capital payments, will be covered by the three-month moratorium, last Friday. 

Now, banks will have discretion in deciding the limits on working capital, with RBI saying that no payment miss should be considered a default and reported to credit information companies.

Apparently, It looks like a double whammy for the borrowers as on one side income has been hit due to COVID-19 pandemic and on the other hand, there is a threat of increased tenure if they opt for RBI relief measure.

The country’s largest lender State Bank of India, in a note to customers, said “interest shall continue to accrue on the outstanding portion of the Term loan during the moratorium period”.

How Does It Work?

Basically, the accrued interest will be collected by the lender in the form of additional EMIs from those borrowers who opt for a three months moratorium.

While explaining the financial burden with the help of an example, SBI said for a home loan of Rs 30 lakh with a remaining maturity of 15 years, the net additional interest would be approx 2.34 lakh equal to 8 EMIs for those borrowers who opt for the moratorium.

Consider another example with an auto loan, it said, “for an auto loan of Rs 6 lakh with a remaining maturity of 54 months the additional interest payable would be Rs 19,000 approx equal to an additional 1.5 EMIs”.

For the customers who do not want to defer recovery of installments or EMI – no action is required and they may continue to pay in the usual course.

Although, according to said, “customer who wants to defer recovery of EMI where collections of such installment is effected through National Automated Clearing House (NACH), please submit an application along with mandate for NACH Extension to stop NACH for these installments through an email to the specified email ID”.

Moreover, SBI issued the list of emails for sending the application for deferment of EMIs.

Who Should Opt For This Facility?

Further, releasing Frequently Asked Questions (FAQ) Indian Banks‘ Association (IBA) said that borrowers whose incomes have not been impacted should pay their EMIs in time.

An association of banks, IBA said “You may take the benefits under this (RBI) package if there is a disruption in your cash flows or there is loss of income. However, you must take into account that the interest on the loans, though not mandatorily payable immediately and gets postponed by 3 months, continues to accrue on your account and results in higher cost,”.