Banking Industry’s Response to RBI’s Moratorium on Loan Deferment Proposal

Follow up to earlier post clarifying RBI’s loan deferment memorandum, this post by @bhartiya_abhi summarizes the response of leading banks.

Presenting the summary and analysis of the response of 7 banks of India (SBI, ICICI, HDFC, PNB HSBC, Citibank and Standard Chartered) in response to RBI deferment option. While each bank has a separate policy these are the highlights according to me.

  1. Out of 7 banks only 2 have allowed automatic deferment of loans
  2. Credit card option has been given by very few banks and even they discourage using this option
  3. SBI made a U turn for automatic deferment
  4. ICICI has the most relaxed criteria for loan deferment
  5. All the foreign banks have very strict criteria for availing this option

I have also provided the source for my analysis. For any confusion please refer the bank sources.

Bank response to RBI deferment option

As part of COVID-19 regulatory package, RBI had rolled out a notification: RBI/2019-20/186 dated March 27, 2020, to reduce the burden of debt servicing caused due to disruptions in business on account of the COVID 19 pandemic and to ensure continuity of business. Following this announcement banks have started rolling their individual policies. Since capturing the policy of each bank would be very difficult and lengthy article I have tried to capture these 7 prominent banks (4 Indian banks and 3 foreign banks).

The response of the banks is varied and assymetric but one thing is common. All the banks want to avoid delay in credit card payments. Another surprise in the list is the U turn taken by SBI which had initially promised to defer the loans automatically. Each of these banks have a special condition attached for some loan. So if you have a loan/credit card from these banks please read it. I have tried to cover the points to the best of my understanding but please refer to the links provided for each bank for further understanding.

I have covered the following banks and the default option for the loans is as follows. Default option means what would happen if you don’t take any action or don’t contact your bank.

Bank nameDefault option for term loans
ICICIEMI is deferred
HDFCEMI will continue
SBIEMI will continue
PNBEMI will continue
HSBCEMI will continue
Standard CharteredEMI is deferred
CitibankEMI will continue
  1. ICICI

The moratorium policy can be downloaded from this link (https://www.icicibank.com/managed-assets/docs/personal/COVID-regulatory-package-FAQs.pdf)

The default option is that most of the term loans (list provided in the pdf above) will be deferred unless customers go for opt out of the moratorium. People can opt out by sending a sms – for these term loans. The number has not been provided in the guideline.

For Term loans

  • The Interest on all these loans will keep accruing and EMI will remain the same. This will result in increase of tenure.
  • For CC and overdraft facility all the interest accumulated will be payable on 1st June 2020.
  • There is no benefit for those who have paid their EMI in March
  • There is no extension of moratorium if currently going
  • There is no late fees for availing the moratorium

For Credit Cards

  • For credit card you have to opt in for moratorium
  • All unpaid amount added in Jun 2020 bill

For EMI on debit card people need to opt in to avail the moratorium option

  • HDFC bank

The HDFC bank moratorium option can been studied in detail from the link  (https://economictimes.indiatimes.com/wealth/borrow/hdfc-bank-loan-emi-moratorium-terms-conditions-and-charges/articleshow/74925989.cms)

For term loans there is an Opt in facility which means the instalments will continue if you do not contact the bank. If you don’t pay the instalment till 30th May then its assumed you want moratorium. To avail the option you have to call the bank numbers and inform them about wanting moratorium.

Separate call needs to be made for each facility. This means if you have multiple loans and you want the moratorium option for more than one loan then you need to call separately for each facility.

There is no credit for installment paid in March so all those who have paid in March can avail this facility for 2 months only.

If you want this option for credit card also then don’t pay and stop auto pay. Otherwise the banks will keep the option. The bank strongly urges its customer to pay whatever they can to avoid heavy interest.

  • SBI

SBI has actually changed its policy from the statements provided in media. It has changed from automatic deferment to opt in policy, so the bank seems to have second thoughts on its initial policy.

You can read more about the deferment guidelines here – https://www.livemint.com/money/personal-finance/how-sbi-customers-can-apply-for-emi-extension-11585737001144.html

To stop the EMI for term loans one needs to go here- https://www.sbi.co.in/stopemi

All term loan customers need to be apply for loan. The tenure can be extended by 3 months if availed for all 3 months.

The customers need to send email to bank to stop NACH. Refund of the March EMI is also possible by request.

The extension is only for term loans and not for credit cards.

  • PNB

The loan moratorium option needs to be opted in to avail the facility.

PNB has provided moratorium option for all Retail loans are typically home loans, personal loans, education loans, auto and any loans that have a fixed tenure. Which means that credit cards have been excluded by PNB also.

More details can be found from the below links

https://www.cnbctv18.com/finance/punjab-national-bank-this-is-how-customers-can-avail-the-3-month-moratorium-5602341.htm

  • In case of housing loans the tenure will be shifted by the months for which moratorium option is taken. Which means that the EMI will be increased to compensate for the non payment of instalments.
  • There is no penalty if no payment is made upto 30th May 2020. Which means people who missed payment in March area also included.
  • Once you have availed the option then you can’t pay in between.
  • Credit cards are not covered under this scheme

Most importantly all your loans are deferred if you opt for one so please be sure you want this option for all your mails.

  • HSBC

The default option is to continue the instalments so one needs to apply for moratorium. HSBC has the most stringent criteria of all the 7 banks that I analysed.

https://www.hsbc.co.in/help/coronavirus/?fbclid=IwAR2E5mok2ehht7G_n_su5_uw3YKtwPG5ZOOLJPGNV8z_f59HAEw8WELgDSw#moratorium-package

The option exists for Home Loans (excluding Smart Home Loans), Loans against property (excluding Smart Loan against Property) and Personal Loans for its Wealth and Personal Banking (WPB) customers.

Some products like smart home loan not covered – These are the home loans which has OD facility.

Credit cards are not covered under this option

One can only apply online for the moratorium.

They will vet the eligibility. The moratorium is not applicable for everyone. Basic conditions are as follows

There basic eligibility criteria for being eligible for moratorium under this scheme are:

i. Loans disbursed or balances generated post 1 March 2020 are not eligible.

ii. You should not be overdue on any instalments or payments due to HSBC India as of 29 March 2020.

iii. All details need to correctly and completely filled in the application form.

For the selected loan the tenure of the loan will increase and EMI will be constant.

The criteria looks the strongest of all the bank norms that I have analysed and ensures that a very few would be eligible for this option

  • Standard Chartered

There is no separate request required from the applicants. Standard Chartered Bank shall be deferring EMIs during the moratorium period falling between April 2020 and May 31, 2020, as a default, for all eligible customers. This is applicable for all loan accounts with no outstanding dues as ofMarch27,2020

Moratorium period is applicable to non-delinquent loan accounts and includes the following Term Loans: •Home Loans

•Loan against Property

•Personal Loans

•Business Instalment Loans

•Guarantee Instalment Loans

The moratorium conditions are as follows:

  • One needs to SMS if they do not want to avail the moratorium.
  • It is only applicable for April and May instalments
  • EMI will be same and tenure will be extended
  • If availed no prepayment or other payment allowed
  • One is be eligible to avail the benefit of deferred payment of EMI during the Moratorium Period only if there are no outstanding dues as of March27,2020.
  • Incase someone is not eligible to avail the benefit under the moratorium Period, then they are required to repay the EMI on time to avoid penal charges and a slippage in credit rating
  • Not applicable for pre EMI on under construction units

So no option has been given for credit card payments

  • Citibank

https://www.online.citibank.co.in/citihelp/COVID-19/Moratorium-FAQs.htm

Citibank has allowed moratorium credit card and term loans(personal loan and home loans) for only those who are preselected by them. They are being contacted by sms and mail.

  • They have also asked customers to avoid using it for credit cards.
  • EMI will remain the same and tenure will be extended
  • If EMI has been paid for April it can be reversed
  • If you are selected and amount is unpaid then no extra charge will be paid

This post was originally posted on Abhishek’s Medium Blog.

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