The ill-effects of lockdown on account of the Covid19 pandemic are not restricted to quarantine and the suffering of those infected by it. The economic impact is something we cannot ignore as well. Be it the closure of industries, MSME’s or SME’s that could not sustain the financial pressure, to the layoff of scores of employees from varied segments of the industry. The financial drought or depression, as some may call it, is the worst the world has ever witnessed in history. Every government is trying to deal with it by announcing financial packages to ride this gigantic storm and provide relief to the industry at large and people in general.
In spirit of the above sentiment, The Reserve Bank of India (RBI) has extended the EMI moratorium period for three months from June to August to provide relief to those who are facing a liquidity crunch. Many customers have been anxiously waiting for the details on how they can avail of the extension on EMI moratorium. Will it be automatic for those who have already opted for EMI moratorium or they will have to apply for it again? Or those who have not applied for it earlier can they opt for it now? Most of the banks have come out with the details. Here is what you need to do in case you are a customer of any of these banks.
ICICI Bank: ICICI Bank customers can apply for the moratorium for June only right now. If you want to extend it further, you will have to reapply for July and August. You need to apply five days before the date on which your EMI is due. If you apply within less than five days, your EMI may be deducted. However, you will be refunded the amount in the next seven working days if you apply for the moratorium in that month. The last day for applying for the moratorium for June is 24th. You can apply for the extension on the bank’s website or through links sent on email or SMS by the bank.
HDFC Bank: Even in the case of HDFC Bank, those who have opted for moratorium earlier will not get moratorium automatically and will have to reapply for the extension on the bank’s website. You can choose for the moratorium for three months while the customers have been given the option to choose one month at a time. No action is required on the part of those who do not want to apply for a moratorium. If the bank deducts the EMI before the person applies for a moratorium for the month of June, it will be refunded within five working days of acceptance of their moratorium request.
State Bank of India: SBI customers will receive an SMS from the bank on the registered number and they will have to reply ‘Yes’ within five days of receipt of the SMS. However, borrowers should remember that opting for moratorium doesn’t ease the cost of the loan and is just a deferment. Borrowers availing of the moratorium will continue to incur interest cost during the moratorium, which will increase their overall interest cost. The adverse impact on the interest cost would be significant in case of big-ticket loans like loan against property or home loans with large loan outstanding and long residual tenure. Hence, only those borrowers who are unable to service their existing loans due to liquidity or cash flow disruptions should opt for the loan moratorium. Others should continue to repay their loans as per their original schedule. Additionally, most banks have come out with calculators, which can be used by borrowers to ascertain their cost before opting for it.
To be frank, moratorium on repayment of loans by no means is akin to financial relief as in real sense it is just a relaxation to pay one’s instalments. Infact the interest payable on the loans continues to mount on account of the extension in payment of the outstanding balance and in the long run adds to the repayment cost. It’s like a mirage of oasis in a desert, what we consider as water is infact nothing but miles and miles of dry sand.
