EMI of loans by banks during the Covid-19 outbreak

New Delhi: Customers who receive an EMI payment notice at the beginning of each month can breathe a sigh of relief as banks have decided to defer receiving such payments for a period of three months under the terms of an announced Covid 19-RBI package. on Friday.

Several banks, including the State Bank of India, sent tweets on Tuesday informing customers that they have deferred payment of EMIs on home loans, vehicle loans, MSME loans and the payment of all other term loans whose installments are due. after March 1 and until May. 31 for three months.

The deferral system will work automatically as most banks will not increase demand for EMI for the next three months. The repayment period after the moratorium will also be extended accordingly.

The scheme would be available to all borrowers who have a standard account at the bank, which means that they have no record of default in the past.

However, customers who do not want to defer their EMI and want to continue paying their loan installment should inform the banks that they do not need to use the moratorium on payments.

Banks have also posted advertisements and posted FAQs on their sites to inform customers of the plan.

It is expected that a number of clients may choose not to participate in the EMI deferral, as during that moratorium period, interest will continue to accrue on the outstanding portion of the term loan. The accrued interest will be added to the outstanding amount of the loan and the repayment schedule of said loans, as well as the residual term, will be carried over in a generalized way three months after the moratorium period.

“Bank of Baroda is providing a 3-month moratorium on all installments due between 03.01.20 and 05.31.20 for all term loans, including corporate loans, MSMEs, agriculture, retail, housing, cars, personal loans, etc. compliance with the RBI COVID-19 Regulatory Package, “the PSU bank said in a tweet.

Analysts and experts tracking the sector said banks would calculate the simple interest rate for the three-month period in which the loan payment is due but not paid under the moratorium. This would be in addition to your EMIs at the end of the three-month forbearance, increasing your monthly bill.

So if you defer payment on an EMI of, say, Rs 1,000, and the bank is charging 10 percent interest on the outstanding balance, you will end up paying an additional Rs 25 for each of the three EMIs that have not been paid. applied. paid during the moratorium. This additional interest can be added to all your future EMIs or your loan tenure could be extended to the same EMI level.

Although the banks have not offered clarity, the EMI deferral would actually benefit clients to defer two installments that are due in the months of April and May, since starting in June, the regular EMI payment will start with the installment every time higher (including two-month principal and interest). fee) or if the EMI remains at the original level, the redemption tenure is extended as additional interest on all future EMIs is adjusted.

Reserve Bank Governor Shaktikanta Das announced on Friday a three-month moratorium on IMEs for all term loans due between March 1 and May 31 and said the repayment schedule for all those loans would be changed three months after the moratorium.

This will bring relief to all borrowers, including those who have home loans, auto loans, education loans, agricultural term loans, crop loans, and retail in their name. It will also be applicable to credit card fees.

At the end of January, more than Rs 13 lakh crore of home loans and Rs 2 lakh crore of auto loans were outstanding, data from the Reserve Bank of India shows.

In addition to retail borrowers, micro, small and medium-sized enterprises and large companies will also benefit from the RBI’s relaxation on loan repayments.

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