New Delhi: Indian banks finally got moving Tuesday to give relief to borrowers by allowing a three-month deferment of loan EMI repayments, four days after the announcement by the Reserve Bank of India to help ease the financial impact of the coronavirus outbreak.
The implementation of the package had apparently been delayed due to confusion about the modalities, forcing the finance ministry and the central bank to intervene Tuesday.
The Department of Financial Services under the Ministry of Finance directed banks to pass on the benefits to the customers at the earliest and ensure the message is communicated to all branches, said a finance ministry official, who did not wish to be identified.
The central bank will answer some frequently asked questions (FAQs) to address the confusion, an RBI spokesperson said.
On Friday, RBI Governor Shaktikanta Das had announced a three-month loan moratorium for all term loans, providing a massive reprieve to borrowers. The loan moratorium meant that borrowers would not have to pay equated monthly instalments (EMIs) either for the loan or on the interest for three months.
It was part of the central bank’s attempts to insulate borrowers from the economic fallout of Covid-19 that has forced many small businesses to shut shop, leading to job losses.
The RBI notification had clarified that interest will continue to accrue on the outstanding portion of the loans during the moratorium period, clearly encouraging those who can afford it to continue paying their EMIs.
Some banks offer clarity
Most state-run banks, including Canara Bank, Punjab National Bank (PNB), Bank of India (BoI), Bank of Baroda and the State Bank of India, took to social media Tuesday afternoon to announce that borrowers were eligible for the loan moratorium as they detailed the process of availing the scheme.
A State Bank of India spokesperson told ThePrint the moratorium will be applicable to all term loans and the bank will shortly put out details on its website.
— Bank of India (@BankofIndia_IN) March 31, 2020
PNB presents relief scheme for our customers. In view of COVID-19, it has been decided to defer payment of all installments on term loan and recovery of interest on cash credit facilities falling due between March 01,2020 and May 31 2020.@DFS_India @dfsfightscorona pic.twitter.com/dHRvu5luXb
— Punjab National Bank (@pnbindia) March 31, 2020
#BankofBaroda is providing a moratorium of 3 months on payment of all instalments falling due between 01.03.20 & 31.05.20 for all term loans including Corporate, MSME, Agriculture, Retail, Housing, Auto, Personal loans, etc. in pursuance of the RBI COVID-19 Regulatory Package.
— Bank of Baroda (@bankofbaroda) March 31, 2020
— State Bank of India (@TheOfficialSBI) March 31, 2020
An HDFC official said the housing finance company will communicate with its customers in a day or two on the options of the moratorium.
Borrowers can defer the repayment of both the principal and interest components of the loan. However, interest will continue to accrue on the outstanding amount. The residual tenor of the loan will also be shifted accordingly.
The confusion lies in the fine print of the deferment. For customers, it remains unclear whether they need to approach banks for seeking a temporary halt in EMI repayment or whether it will be done automatically.
For instance, banks like PNB and BoI require customers to contact their respective branches to opt for the deferment. But the IDBI Bank has specifically clarified that the EMI moratorium will be uniformly applicable to all customers unless a customer specifically writes to the bank saying they wish to continue paying EMIs.
However, most banks are yet to provide this kind of clarity even though four days have passed since the RBI’s announcement.
There is also confusion on the due EMI payments of March.
Though the RBI notification issued on 27 March permitted lending institutions to grant a moratorium on payment of all instalments due between 1 March and 31 May 2020, banks continued to debit EMIs.