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Borrowers, including retail borrowers, must carefully weigh their options before opting for deferment of the installments and interest/Equated Monthly Installments (EMIs) on term loans falling due between March 1, 2020, and May 31, 2020, under the Reserve Bank of India’s Covid-19 regulatory package. It could result in an increase in the amount/number of EMIs.
State Bank of India has clearly told its customers opting to defer recovery of installment in their term loan account till May 31, 2020, that interest will continue to accrue to their loan account during the period of deferment, and this could result in increase in the amount/number of their EMIs.
India’s largest bank said interest will continue to accrue on the outstanding portion of the term loan during the moratorium period. The bank gave two examples to explain the possible impact of the extension of the repayment period.
For example, for an auto loan of ₹6 lakh with a remaining maturity of 54 months, the additional interest payable would be about ₹19,000, which is equal to additional 1.5 EMIs.
For a loan of ₹30 lakh with a remaining maturity of 15 years, the net additional interest would be about ₹2.34 lakh, which is equal to 8 EMIs.
SBI said no action is required to be taken by customers who do not want to defer recovery of installments /EMI. They may continue to pay in usual course. In the case of customers wanting to defer recovery of installments/EMI, they must submit an application.
The bank said customers, whose collections of installment / EMI is effected through National Automated Clearing House (NACH), must submit an application, along with mandate for NACH Extension to stop NACH for these installments through an e-mail to the specified e-mail ID (unique for each of the bank’s 17 circles).
Customers, whose collections of installment / EMI is effected via standing instructions, must submit an application through an e-mail to the specified email ID.
In the case of customers wanting refund of the installment/EMI already paid, they must submit an application to the specified email ID.
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