Loan Moratorium: What Different Banks Are Offering
There’s no denying that the COVID-19 pandemic has dealt a major blow to the economy. From marquee airlines announcing big paycuts in employee salaries to major businesses shutting shop, the loss of income has made it difficult for many to service their debt burden. Keeping this in mind, the RBI last week announced a slew of measures among which it has allowed lending institutions to offer a three-month moratorium to borrowers on repayment of all term loans. The moratorium is for payment of all installments due between Mar 1, 2020 and May 31, 2020. That being said, during the term of the moratorium, interest on the outstanding balance will continue to accrue. Following the announcement, all banks have started intimating their customers on how they can opt-in for the moratorium.
Let’s take a look at what major banks are offering in light of this announcement:
State Bank of India
SBI will offer a offer a complete moratorium on all term loan repayments extended till March 1 and has left it to its borrowers to take a call. Customers have been given the following options:
Customers who do not want to defer recovery of installments/EMI: No action is required. Borrowers may continue to pay in usual course.
Customers who want to defer recovery of installments/EMI:
NACH: Where collections of such installment / EMI is effected through National Automated Clearing House (NACH), customers will need to submit an Application (Annex-I) along with mandate for NACH Extension-(Annexure-II) to stop NACH for these installments through an e-mail to the specified email ID(Annexure-III).
Standing Instructions (SI): Customers will need to submit an Application (Annexure-I)through an email to the specified email ID.(Annexure-III).
Impact of Deferment:
To help its borrowers make an informed decision, the country’s largest lender has also furnished the impact of deferment on various loans:
Interest shall continue to accrue on the outstanding portion of the Term Loan during the moratorium period. The possible impact of the extension of the repayment period has been explained below :
Impact in case of Auto Loan: For a loan of Rs. 6 lakhs with a remaining maturity of 54 months, the additional interest payable would be Rs. 19,000 approx. equal to additional 1.5 EMIs.
Impact in case of Home Loan: For a loan of Rs. 30 lakhs with a remaining maturity of 15 years , the net additional interest would be approx. Rs. 2.34 lakhs equal to 8 EMIs.
The bank announced on its website that all its retails customers will be eligible for the moratorium as announced by the RBI. However, since this is a voluntary benefit being offered by the bank, customers who want to avail it will have to contact the bank. In case customers do not want to opt for the moratorium, they do not need to perform any action and the installment would be debited from their accounts as per usual.
Who are eligible?
All HDFC Bank customers who have availed of retail installment loan or any other retail credit facilities prior to 1st March, 2020 are eligible. Customers having overdues prior to 1st March, 2020 may also opt for the moratorium, and their requests shall be considered by the bank based on its merits. All Agri Loans (Kisan Gold Card) and Microfinance customers under the Bank’s Sustainable Livelihood Initiative are also eligible. All Corporate as well as SME customers are also eligible.
What will happen if you choose the EMI moratorium?
The bank will not ask for any EMI payment till May 31st, 2020. Interest will continue to accrue on the principal outstanding for the period of the moratorium at the contracted rate of the loan. The loan tenure will get extended by the corresponding period for which the moratorium has been availed. For example, if the EMI for the month of March 2020 has been paid and moratorium for April & May 2020 has been availed, then the loan tenure will be extended by 2 months.
What will happen if you do not want the EMI moratorium?
If you do not want the EMI moratorium, no further action is required from your side. The bank will continue to honour your repayment instructions. The bank encourages customers with adequate funds to continue paying during this period to avoid the extra interest charges and tenor extension. However, if you skip your EMI payment during this period, it is understood that you require EMI moratorium till May 2020.
How do you avail this EMI moratorium?
You will have to provide your consent to the bank through any of the following ways: Call on this number and follow the instructions – 022-50042333, 022-50042211 OR submit your request by clicking this link.
Will interest be levied for the moratorium period on your Credit Card outstanding and loan on Credit Cards?
Yes, interest will be levied as per the contracted rate on the card. Opting for 3 months moratorium allows you to defer the payment of your Credit Card dues and loan installments taken on your Credit Card till 31st May, 2020. The bank encourages customers to make full payments towards the outstanding wherever possible to avoid/minimise levy of interest charges for this period. Kindly note that the moratorium is a deferment of payment and not a waiver of interest. You are required to pay the minimum amount due or total outstanding along with accrued interest charges on the due date after 31st May, 2020.
HDFC Ltd. has offered moratorium for its Home Loan borrowers.
HDFC’s customers will have the following options:
- To retain the existing EMI and thus extend the term.
- To increase the EMI and retain the term.
- To pay the accumulated interest for the moratorium period at the end of three months of the moratorium period.
- To continue making the payments regularly as before.
Customers can opt for moratorium latest by April 7th, 2020 by clicking here.
How to opt for moratorium
You can opt for moratorium by either visiting the bank’s website or go through the link that is sent to you through email and SMS. This is to enable you to close your option through the digital mode.
Process to request moratorium
The request for moratorium has to be made for each account separately by the “Borrower” of the account. Once you log in, the next screen would display the options for moratorium as follows:
- OPT IN – Increase the EMI with the same balance tenure. You can always prepay a certain amount and reduce your EMI.
- OPT IN – Keep the EMI and extend the term. The extension may be different from the period of moratorium.
- OPT OUT – Your EMIs will continue as per the current schedule without any deferment and no accrued interest would be added to your principal.
For all OPT-INs, the bank is going to suspend the EMI/ PMI recovery immediately.
The interest accrued for three months during the period of moratorium will be added to the outstanding principal and recovered over the balance tenure. In case the bank has already received your payment for March 2020, it will add the interest only for two months and not three months.
What happens if you don’t do anything
If you don’t do anything i.e. neither opt in or opt out, then the bank will not change your account. The default choice is, thus, opt out.
What if you have multiple loans
You will have to select the moratorium option for each account separately.
Your term after the moratorium
The residual term will be extended to amortize the accumulated interest along with the outstanding principal. Thus, the interest during moratorium period will be capitalized and depending on the customer’s option to increase the EMI or retain the EMI, the residual term will be increased or retained to amortize the principal together with the accrued interest. The moratorium does not cancel or waive the repayment obligation for the 3 months, but is a deferment of the same.
The bank announced that borrowers can choose to OPT-IN or OPT-OUT to avail the moratorium in respect of the credit facilities that have been availed by the customer.
How can you opt for the moratorium?
You can opt for the moratorium by clicking the link shared with you by the bank through (i) SMS or (ii) e-mail. You may also visit ICICI Bank’s website www.icicibank.com.
Do you need to submit fresh Auto Debit or NACH debit mandates?
No, as the EMI will remain same and tenure will increase to recover the deferred interest accrued during the moratorium period, there is no need of fresh Auto Debit (AD) or NACH mandate. If you opt for moratorium, the residual tenure will increase to recover the accrued interest during moratorium period. However, in case the installment amount increases, then a fresh NACH mandated will be required.
How will interest be charged and recovered for retail term loans such as Home Loans, Personal Loans, Consumer Durable Loans, Two-Wheeler Loans, Auto Loans?
The accrued interest would be added to the principal amount which will increase the residual tenure of the loan except in cases where extension of tenure is not possible in which case the EMI amount will increase. Illustration: Mr. Kumar availed of a housing loan in Mar 01, 2020 amounting to Rs. 1 crore with loan tenure of 236 months. If Mr. Kumar wants to avail of moratorium of installment of Rs. 90,521 which is due on Apr 01, 2020, then the interest for the month of March amounting to Rs. 75,000 will be added to the principal amount and revised opening principal amount on Apr 01, 2020 will become Rs. 10,075. The interest will be computed on revised principal. Similarly, the interest for the month of April which is payable on May 01, 2020 of Rs. 75,562 will be added to the opening principal on May 01, 2020 which will be Rs. 10,150,562. The interest will be computed on revised principal. In this case, Mr. Kumar’s tenure will increase from 236 months to 249 months considering the unchanged rate of interest and installment amount during this period.
If you have sufficient balance in your account and installment of your loan(s) is due, will the bank debit the EMI during this period?
Yes, if you have not opted-in for the moratorium.
Do you need to submit any documents for availing the moratorium?
No, you can opt for the moratorium by clicking the link shared with you by the bank through (i) SMS or (ii) e-mail. You may also visit ICICI Bank’s website www.icicibank.com.
How will interest be charged and recovered for cash credit/overdraft facilities?
The accrued interest will be due and payable immediately after the end of the moratorium i.e. in Jun, 2020. The postponed interest (funded interest) shall carry interest at the rate applicable on the credit facility and the underlying security shall continue to secure the funded interest.
Will there be late payment charges/ default interest/ additional interest for the deferred installments during the moratorium period?
No late payment charges/ default interest/ additional interest shall be levied during the moratorium period.
Given the large number of microfinance and vehicle finance borrowers the bank has as its customers, IndusInd Bank has decided to offer an automatic moratorium to all its retail and small business borrowers. Hence, the bank will not raise the installment demand during this period and borrowers are not required to pay the installment during the period. Accordingly, the residual tenor of repayment schedule will be extended.
What is the process to be followed for getting the benefit of installment moratorium?
The scheme will be uniformly applicable to all standard term loans under Retail Term Loans Program (Personal Loan, Business Installment Loans, Medical Equipment Loans etc.) as on March 1, 2020 for loans booked before March 1, 2020. If you have already paid the March 2020 installment, the relief would be applicable for the EMI payable in April and May 2020. You will not need to raise a separate request.
If you choose to avail this moratorium period, how will your loan be adjusted?
Moratorium of three months on payment of all installments falling due between March 1, 2020 and May 31, 2020 for loans booked before March 1, 2020 will be offered and no installment demand will be raised to the loan account of the borrower. During the said moratorium period, interest shall continue to accrue on the outstanding portion of the term loan. The interest accrued during the moratorium period will be added to the outstanding loan amount and the loan will be extended for a revised tenor, keeping the EMI as the same.
What do you need to do if you do not want to avail the moratorium benefit?
The scheme is uniformly applicable to all standard term loans under Retail Term Loans Program (Personal Loan, Business Installment Loans, Medical Equipment Loans etc ) as on March 1, 2020 for loans booked before March 1, 2020. However, if you wish to make the EMI payment during this moratorium period as well, then the same can be remitted to your loan account as pre-payment and the same will be adjusted against the principal amount of the loan. No pre-payment charges will be recovered. ECS/SI option will not be active during this period hence the EMI payment if desired by the customer has to pay by him/her through the bank’s digital payment gateway.
What will happen after the relief period /moratorium is completed?
During the said moratorium period, interest shall continue to accrue on the outstanding portion of the term loan. The interest accrued during the moratorium period will be added to the outstanding loan amount and the loan will be extended for a revised tenor, keeping the EMI as the same.
Kotak Mahindra Bank
Kotak Mahindra has asked customers to send an email from their registered mail id to firstname.lastname@example.org if they want to avail the moratorium. They should quote the loan account/APAC number while seeking relief and send the email within seven days of the installment falling due. The repayment schedule of term loans will shift by up to three months and the tenor of the term loan will be commensurately extended. EMIs will be appropriately recalculated, including interest during moratorium period, the bank said. If borrowers have already paid their installments or serviced their interest for March 2020, such borrowers can avail moratorium for installments falling due in April and May 2020.
The bank would be presenting the post-dated cheques / actioning ECS or NACH -mandates etc., provided by the customers, for collection as per the respective due dates. Customers that are desirous of availing the relief under the RBI circular, should send a communication to the bank within seven days (or extended date as may be permitted by the bank) from their first due date falling on or after April 1, 2020 through a mail from their registered mail id to email@example.com. Customers, whose instrument so sent for collection is not cleared, will be deemed to have availed of the moratorium and necessary relief would be provided as per the RBI guidelines.
The bank has offered an automatic moratorium on payment of installments and interest for various term loans/credit card dues, and/or defer the interest for working capital facilities due between March 1, 2020 and May 31, 2020 for its borrowers.
The bank customers will have to go to the official website of the bank and click below the Key Updates tab on the website. When the new page opens, click the ‘Avail Now’ option to proceed further. On the new window tab, you’ll need to enter your registered mobile number and the captcha under it.
The bank also informed that the repayment would resume from June 2020, once the deferment period is over.
The private lender has also advised borrowers whose cash flows are not impacted to opt out of the moratorium by sending an email or by reaching out to any of bank branches. Bank will understand that borrowers have opted for the moratorium if there is no written communication stating otherwise. The bank also specified that the interest would continue to accrue on the outstanding principal/utilised amount at applicable rate of interest.
Citibank has informed its customers through SMS and email that the bank will be offering a moratorium on their customers’ Citi Credit Card dues and/or EMI(s). This benefit will be applicable for cards in good standing as of March, 2020 (i.e. there is no default in repayment of prior dues)
Therefore, customers who are not able to pay any of their future dues on their Citi Credit Card, till 31st May, 2020, will not be levied any late-payment charges, nor any returned payment charges. Also, the EMIs on their card will be deferred during the moratorium period and their account will not be reported to the credit bureaus as being in default. However, interest charges will continue to accrue in this period, as usual. The bank, therefore, encourages its customers to continue paying their dues, for as much as possible, to avoid interest charges.
The bank also stated that customers’ accounts will be given due credit for the repayments made during this period, and will be adjusted against their outstanding, to help reduce interest charges. The ECS / SI / NACH maintained for credit card repayments will continue as earlier unless the customer informs the bank otherwise.
Yes Bank published a notification in its website informing customers that they be sent an SMS by the bank to their registered mobile number requesting them to ‘OPT IN’ for the scheme. Customers who are interested in opting for the scheme will have to click on the link provided in the SMS and follow the instructions if they choose to opt-in, on or prior to April 15, 2020, unless otherwise extended by the bank.
If you avail this moratorium, is it that the bank will not charge any interest during the moratorium period?
In line with RBI guidelines, the bank will continue to charge or accrue interest during the period of moratorium. This interest accrued during the moratorium period shall need to be paid by the customer to the bank at the end of the moratorium period. The bank encourages the borrower’s with adequate funds and cash flows to continue to pay the installments to avoid additional interest and elongation of the tenor.
Do you need to submit fresh Auto Debit / Post Dated Cheque’s / NACH mandates?
No, if you opt for the moratorium scheme, the residual tenor will increase to recover the accrued interest during moratorium period. However, in case the EMI or installment amount increases or existing NACH mandate or PDC expires, then a fresh mandate or PDC will be required.
IDFC First Bank
IDFC First Bank will activate the moratorium for customers if they apply for it by email with mobile and loan account numbers. The bank will assess the eligibility of the borrower and then determine if they can be extended the moratorium. The bank will also reach out to its rural and semi-urban customers through text messages and phone calls to make them aware of the provisions.
IDBI Bank: The bank has granted its customers an automatic three-month moratorium on repayment of loans. If the borrower does not want to avail the extension, he/she will be required to do the following as per the bank. “Customer may opt out from EMI moratorium by writing an email to firstname.lastname@example.org”
- The email should mention the following details:
- Email subject should be Loan Account number
- In the mail body, please mention the following details:
- Name of the borrower
- Loan account number
Customer to mention in the email that “I wish to opt out from the installment moratorium facility offered by the bank, hence kindly deposit my EMI by way of ECS/SI”.
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