Loan Moratorium: What Your Bank Is Offering

After the Reserve Bank of India allowed lenders to offer a three-month moratorium on term loans and working capital repayments, banks have started rolling out their communications to their borrowers.

Most public sector banks have adopted an ‘opt-out’ strategy, where customers are being automatically offered a moratorium unless they inform the bank that they don’t want one. In contrast, most private banks are asking individual borrowers to approach them with requests for moratorium, which will be assessed on a case-by-case basis.

The move announced by RBI was aimed at helping customers who have seen incomes and cash flows disrupted by restrictions imposed to curb the spread of Covid-19.

State Bank of India

SBI plans to offer a complete moratorium on all term loan repayments extended till March 1, BloombergQuint reported on Monday. India’s largest lender will be reaching out to customers through an email campaign and through phone calls to inform them about the specifics of the moratorium and how it would impact their repayment schedule, as well as interest cost.

The customers can then choose to opt-out of the plan, if they want. The bank’s board will meet this week to finalise the contours of the plan and make an announcement.

Bank of Baroda

Bank of Baroda took to its official Twitter account to announce a blanket moratorium for all its term loan borrowers on Tuesday. This includes those with corporate, micro , small and medium enterprises (MSMEs), agriculture, retail, housing, auto, education and personal loans.

The bank has not yet detailed how customers can opt out of the plan.

Punjab National Bank

The public sector lender released a set of frequently asked questions on its website, where it clarified that the moratorium would apply to term loans as well as working capital loans.

Dues will continue to accrue interest for the duration of the moratorium, the bank said. It added that the accrued interest for the three months would be collected immediately after the moratorium is lifted.

It also gave the option to customers to continue repaying their loans according to the normal schedule, without the moratorium.

Other Public Sector Lenders

Borrowers of other banks including Canara Bank, Syndicate Bank, Oriental Bank of Commerce, United Bank of India, Union Bank of India, Andhra Bank and Corporation Bank will also get a blanket approval for a moratorium.

The banks have also tried to educate customers that availing the moratorium will not affect the interest rate levied on the loan, credit rating and credit history of the borrower, but that interest will continue to be charged.

HDFC Bank

The bank said all its retail customers would be eligible for the moratorium as announced by the RBI. However, this is a voluntary benefit offered to the customers and they would have to contact the bank and avail it, HDFC Bank said on its website. 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 they regularly are. The bank encourages borrowers with adequate funds to continue paying their dues as per the regular schedule.

If a borrower has already paid an installment for April and still wants to avail the moratorium, they can seek a refund from the bank, it said.

In cases where customers have more than one loan from HDFC Bank, they can seek a moratorium for each of these accounts. The bank said its corporate and SME borrowers are also eligible for the moratorium, however, the bank would take a decision on a case by case basis.

ICICI Bank

India’s second largest private bank has decided to reach out to its borrowers through emails and explain the specifics of the moratorium, according to a person with direct knowledge of the development.

The lender will give borrowers a few days to respond to the email and then adjust upcoming repayments accordingly, this person said.

The bank will be clear in its communication that the borrowers will have to pay the interest accrued at the end of the 90-day period, which may increase the interest cost or extend the loan tenor for the customer, the person said.

IndusInd Bank

Owing to the large number of microfinance and vehicle finance borrowers on its books, IndusInd Bank has decided to offer an automatic moratorium to all its retail and small business borrowers, a senior official at the bank said on the condition of anonymity. The borrowers, however, will be explained the nuances of the moratorium and will be encouraged to repay their dues on time, if they have the funds to do so. According to the banker, the corporate borrowers will have to approach their respective relationship managers to avail the moratorium.

Kotak Mahindra Bank

Kotak Mahindra has asked customers to send an email from their registered mail id to pay.later@kotak.com if they want to avail of the moratorium. They should quote the loan account number while seeking relief and send the email within seven days of the instalment 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 instalments or serviced their interest for March 2020, such borrowers can avail moratorium for instalments falling due in April and May 2020.

Credit card customers will be sent instructions along with their first statement falling due on or after April 1, 2020. “Customers who do not pay their total amount due, as payable in the months of March, April, May would be automatically enrolled for the Moratorium,” the bank said in an email to customers.

IDBI Bank

IDBI Bank, promoted by Life Insurance Corporation, has also adopted the strategy used by government owned banks. It will offer the moratorium to all its term loan and working capital borrowers.

On its website, IDBI Bank released a set of frequently asked questions, clarifying how the loan moratorium would work. For customers who wish to opt out of the moratorium, the bank has created a special email address, where customers can safely send their loan details and seek exemption.

IDFC First Bank

On its website, the private sector lender said that borrowers can avail the moratorium by writing to it. The bank would assess the eligibility of the borrower and then determine if they can be extended the moratorium.

The bank said that it is also reaching out to its rural and semi-urban customers through text messages and phone calls to make them aware of the provisions.

HDFC Bank, Axis Bank and IndusInd Bank, among others have not yet publicly disclosed their plans to deal with the moratorium.