Covid-19 relief: You can defer 3 EMIs but that may be a very costly option

SBI informed customers that in some cases, deferring 3 EMIs on a home loan may force the borrower to pay 8 more EMIs

After RBI allowed commercial banks to provide their customers a moratorium of three months for repayment of term loans, public sector banks have sprung into action. Public sector banks have informed their customers about deferment of EMIs and interest dues to help soften the blow due the coronavirus crisis. The deferment may come at a price though.

The country's largest lender State Bank of India 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 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 customers defers three EMIs then they will end up paying 8 EMIs more.

Last week, the Reserve Bank of India (RBI) gave 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 March 1, 2020 to May 31, 2020 and extended the repaymentperiod 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 SBI said.

Bank of Baroda said it is providing a moratorium of 3 months on payment of all installments 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.

Punjab National Bank (PNB) tweeted: "Due to COVID-19 Pandemic, instalments/ 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 Managing Director Rajkiran Rai G told PTI that branches have been informed about with respect to moratorium on all term loans.

"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," he said.

Banks on its own unilaterally cannot stop ECS payment due to legal issue but the customer has the option of requesting bank to stop it, Rai said.

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 and/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.
 

Rai of Union Banksaid the customers whose income has not been impacted are encouraged to continue payment as per the scheduled.

Another lender tweeted:"As per COVID 19 regulatory package of RBI, Indian Bank allows a moratorium by deferring payment of EMI/ Term Loan Instalments & Interest/ Interest on Working Capital for 3 months w.e.f 1st March 2020."

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