The moratorium period offered by RBI ended on 31 August 2020, however, State Bank of India is the first to extend the moratorium period up to 24 months. This relief is valid for all home loans and retail loan borrowers who have availed a loan before March 1, 2020, and was regular with repayments. The step has been taken to maintain liquidity among the customers who have been impacted by Covid-19. As per the moratorium granted customers have the option to reschedule their instalments and extend the tenure by a period equivalent to the moratorium.
- According to the restructuring framework, this moratorium extension will be in addition to the moratorium granted by the banks earlier.
- During the moratorium period, the EMIs will not be required to be paid by the borrowers.
- In order to avail the benefits borrowers will have to demonstrate that their income has been hit because of the COVID pandemic.
- Borrowers opting for this moratorium period will not be considered as defaulters or NPAs.
- The step is likely to be followed by other private home loan lenders such as HDFC, ICICI and AXIS bank.
So, the borrowers who are finding it difficult to pay their EMI for a home loan, personal loan, car loan or for credit card payments can opt for the moratorium and can ask their lenders/banks to restructure their loans.
How interest will be calculated during the moratorium period
Once the borrower opts for the moratorium, he/she does not need to pay EMIs on the loan during the moratorium period. The EMI calculation for your loan starts again, as the loan tenure extends by the moratorium period you opt for. Hence, the EMI payable after the moratorium is recalculated and restructured.
Apart from this, there is also a change in the pricing of the loan and this is also the reason lenders restructuring and re-calculating your EMIs.
After you opt for the moratorium you will need to pay an additional interest of 0.35 per cent per annum, this is over and above the current pricing of your loan. This is also important to note that the rise in pricing will remain for the tenure of the loan.
To reduce the interest accumulation during the moratorium period, borrowers can still keep on playing the EMIs when they have surplus funds. Doing this will help them to lower the interest accrued during the moratorium period and can save them from the increased EMIs for the future.
How to apply for the Moratorium?
To help borrowers apply for the moratorium, SBI has launched an online portal to enable borrowers to check their eligibility and avail the moratorium and restructuring which is valid for all the retail loans including home loans, education loans, auto loans, and personal loans. Borrowers who access the portal for restructuring will need to visit the bank as the signature of the borrower will be required on the loan document to initiate the process. Besides the eligibility, the portal will also take care of all the queries of the borrower.
Following SBI, HDFC Bank has also started an online facility where borrowers can submit applications in order to avail moratorium. As per these applications, the loans will be restructured and will be reported to the credit bureau as restructured and as per norms, all loans availed will be classified as restructured even if only one loan is being restructured.
However, it is to be kept in mind that interest will continue to accrue on the outstanding portion of your loan during the moratorium period. And you will need to pay more in the future.