Deferment of Loan: COVID-19

हिंदी में देखें

The Reserve Bank of India announced measures to improve the economy in response to the COVID-19 crisis. All financial institutions were permitted to allow a moratorium of three months on payments of instalments of term loans, credit card dues and interest on limits arising between 1st March 2020 and 31st May 2020. The RBI has issued a circular dated 27th March 2020 to this effect.

Further, following RBI’s directives dated 23.05.2020, which extended the moratorium for another 3 months, the moratorium period of all eligible loan accounts has been extended by the bank for further 3 months, i.e. upto 31st August 2020. Accordingly, the total moratorium period in all eligible loan accounts will now be 6 months. Please note that the moratorium is only a deferment of repayments and not a waiver.

Eligible accounts are defined as those accounts that had not opted out of the moratorium in the first phase of this exercise, i.e. for payments falling due between 1st March, 2020 and 31st May, 2020.

We strongly encourage that all customers who are capable of continuing their repayments as normal should NOT avail the moratorium as the impact of interest compounding may lead to a significant increase in the total interest paid over the remaining life of the loan post moratorium. Availing the moratorium will add the interest accrued during the moratorium period to your loan outstanding, which you have to repay in the form of additional/increased EMIs once the moratorium period is over. You can opt out of the moratorium by filling out the form at the bottom of this page. Alternatively, you can also send a opt out SMS. Please type “AVAILMRT<SPACE> <LOAN A/C NUMBER> <SPACE>N”  and send to number 9211401010.

The impact of availing a moratorium is illustrated below through an example to ensure that our customers understand the financial impacts clearly

Illustration: Borrower A has the following loan outstanding:

Shivalik Bank - Moratorium

Assuming moratorium has been availed for 3 months (March, April & May 2020):

Shivalik Bank - Moratorium

Assuming moratorium has been availed for 6 months (March to August 2020):

Note: Above figures and calculation are approximate and only for illustration purpose to make the customer understand the financial implications of moratorium.

Shivalik Mercantile Co-operative Bank Ltd. has instituted the following policy terms post the approval of its Board of Directors :

Rescheduling of Payments – Term Loans

All term loans will be subjected to the following allowances:

  • The bank would grant a moratorium of three months on payment of all instalments (Principal, Interest and Charges) falling due between March 1, 2020 and May 31, 2020 on all term loans. This would be further extended for a period of three months, i.e. up to August 31, 2020 on all eligible loan accounts as defined above.
  • Interest on the loan will be debited to the loan account and thus, would continue to accrue as normal during this period and be recognised as part of the Bank’s interest income on a monthly basis. This will increase the outstanding balance of the account by the amount of interest debited during the moratorium period.
  • On 31 August 2020, all term loans will be rescheduled, and the tenor/EMI of these loans would be increased to take care of the increase in outstanding balance.
  • As a result, the interest accrued over these three/six months would be payable over the remaining (extended) term of the loan (post rescheduling).
  • No charges would be levied to customer accounts in respect of such rescheduling.
  • The accounts rescheduled under this policy would not be downgraded by one category in terms of asset classification requirements. Rescheduling of payment including interest will not qualify as a default for purpose of supervisory reporting.
  • By not opting out of the scheme prior to their instalment date for June 2020, the customer accepts the following:
    • The repayment duration of their loan will get extended due to the above period of deferment. 
    • Interest will continue to accrue on the loan account during the period of deferment and this could result in increase in the amount/number of my EMIs. 
    • Authorizes the bank to recover the deferred instalments/ EMIs in future through NACH/SI.

Rescheduling of Payments –Working Capital Facilities

Working capital facilities such as Cash Credit and Overdraft Limits will be subjected to the following allowances:

  • The bank would grant a deferment to the recovery of interest applied in respect of all such facilities during the period from March 1, 2020 upto May 31, 2020. This would be extended for a period of three months, i.e. up to August 31, 2020 on all eligible accounts as defined above.
  • The interest on the utilised portion of the working capital facility will be debited to the CC/OD account, and will continue to accrue as normal during this period and be recognised as part of the Bank’s interest income on a monthly basis.
  • The accumulated interest for the deferment period up to August 31, 2020 may be converted into a funded interest term loan (FITL), which shall be repayable not later than March 31, 2021. Further details on this will be shared in due course.
  • Alternatively, the borrower may pay the accumulated accrued interest immediately after the completion of this period.

Terms and Conditions

  • The information presented are provided as per RBI and GOI guidelines in existence. These are subject to change based on further guidelines and policy terms issued by the government, RBI and other regulatory bodies.
  • The above calculations are illustrative only and will vary on a case to case basis. They are only shown to provide an indicative guide to the customer. The customers are encouraged to obtain independent financial advice regarding their options.
  • The decision to offer a moratorium to a customer will be at the sole discretion of the Bank.

Frequently Asked Questions (FAQs)

To help you understand, certain Frequently Asked Questions are provided below:

  • What does the 3-month RBI moratorium period mean for Term Loans?

Given the circumstances of the global pandemic, RBI has allowed banks to defer the monthly loan repayments / equated monthly instalments (EMIs) falling between 1st March 2020 to 31st May 2020. This has been further extended for  a period of 3 months, i.e. up to 31st August 2020 for all accounts who have availed this option from March to May 2020. This is not an exemption from repaying the amount. The payment can only be “deferred” by 3 or 6 months as per RBI notifications and subsequent clarifications.

If you take advantage of the moratorium, your credit score will not be impacted by non-payment of dues for 6 months till 31st August 2020, but interest will continue to be charged as per the terms of the loan agreement.

  • What does the (3-month + 3-month) RBI moratorium period mean for Working Capital Facilities?

Given the circumstances of the global pandemic, RBI has allowed banks to defer the repayment of interest falling between 1st March 2020 to 31st May 2020. This has been further extended for  a period of 3 months, i.e. up to 31st August 2020 for all accounts who have availed this option from March to May 2020.

This is not an exemption from repaying the amount. The payment can only be “deferred” by 3 or 6 months as per RBI notifications and subsequent clarifications.

If you take advantage of the moratorium, your credit score will not be impacted by non-payment of dues for 6 months till 31st August 2020, but interest will continue to be charged as per the terms of the loan agreement.

  • What will happen after the three month moratorium period is over?

Post the completion of the six month moratorium period, the following approach would be adopted :

Term Loans : The loan will be rescheduled on or after 31 August 2020 and the term of the loan will be increased.  Further, your EMI payments may increase for the remainder of the term of the loan. This means that you will not have to immediately repay the full amount of the deferred EMIs on 1 September 2020 for term loans.

Working Capital Facilities : The deferred accumulated interest on the working capital facilities for the period between 1 March – 31 August 2020 would be posted to the accounts and can be converted to a term loan with a maturity date of 31 March 2021.

  • Does this moratorium apply to all consumers including me?

The RBI has permitted banks to offer the moratorium at their discretion. Banks can define parameters of eligibility, if any. Shivalik Bank has decided to grant such moratorium to all customers by default as many customers may not be able to provide positive confirmation in such times. This has been done to protect you from impacting credit histories for non-repayment and preventing application of loan repayment default related charges in the customer accounts.

However, if a customer wishes to NOT avail the moratorium on their loan facilities (Term Loans / Working Capital), they can complete a form at the end of this page and submit this request to the bank. The bank will reconfigure their loan repayments within 7 working days.  Alternatively, customer can send SMS“AVAILMRT<SPACE> <LOAN A/C NUMBER> <SPACE>N” on number 9211401010.

  • If I take this option, will interest charges be levied for the deferred period of payment?

The RBI notification has clearly specified that interest will continue to be charged on the outstanding amount during the deferment period.

  • Will taking this option impact my credit score?

Exercising this option will not impact your credit score.

  • If I do not want to avail this option, how can I do it?

If a customer wishes NOT to avail the moratorium on their loan facilities (Term Loans / Working Capital), they can complete a form at the end of this page and submit this request to the bank. The bank will reconfigure their loan repayments within 7 working days. Alternatively, customer can send SMS “AVAILMRT<SPACE> <LOAN A/C NUMBER> <SPACE>N” on number 9211401010.

  • What happens if any outstanding dues are left unpaid by me prior to 1 March 2020?

As per RBI guidelines, these have not been deferred and hence any outstanding dues on loan facilities prior to 1 March 2020 would be treated as default and would attract penal interest and charges as per the bank’s terms and conditions. This will also be reported to the credit bureaus and may impact your credit scores. The bank strongly recommends that you repay all the dues outstanding for any period prior to 1 March 2020 at the earliest.

  • Is this a waiver or deferment?

The moratorium offered by the bank is a deferment only and does not represent a waiver. This is without prejudice to the provisions of the Loan Documents.

  • I want to continue paying my EMIs. What action is required from my end?

In that case, no action is required by you. You may continue to pay as usual. The loan will continue as per the original repayment schedule.

  • I pay my instalments manually. Do I have to apply separately for deferment/ postponement of my instalments?

In case you were paying your instalments manually then no action is required at your end. You may start paying EMIs after the moratorium period is over i.e. 1st September 2020 onwards. The total repayment period will get extended accordingly.

  • If I have more than one loan account, will all loan accounts be eligible to avail the relief?

Yes, all loan accounts as mentioned above will be eligible to avail the relief.

  • Is it mandatory to apply for deferment in repayment of EMI(s)?

No. This is optional as per the requirement of the customer. However, we encourage customers with adequate funds to continue paying during this period to avoid any extra interest burden.

  • Will deferment of EMI result in increase of my future EMI amount?

The customer will need to decide upon increasing the EMI amount or the loan term to compensate for the deferment provided during moratorium period.

  • In case my account has sufficient balance and I do not avail deferment of 6 EMIs, whether my Standing Instructions with respect to loan account will be effected?

SI will continue to be executed if you have given consent/request for not availing the moratorium benefit, which means instalments/ EMIs will be recovered.

  • I have opted for deferment of EMI but after the gap of 1-2 months, I want to continue paying the EMI as earlier. What will be the impact?

You can choose to pay the EMIs even if you have opted for the deferment. When your account will be rescheduled after moratorium you will get benefit of interest and EMI for the amounts paid. Shivalik is providing you the most flexibility to ensure that your financial position is supported and strengthened during this pandemic.

  • If I have already paid my EMI for March 2020 or pay an EMI for March, April, May, June, July or August 2020 through a standing instruction, what will happen to these funds?

For customers availing the moratorium facility (default option), these funds will continue to be held in the loan account as advance payment towards your loan and will be adjusted against the repayment due once the moratorium period is over. These amounts will not be eligible for refund to the borrowers.

For customers who have chosen not to opt for the moratorium facility, your loan repayments will continue as before, with regular repayments required for March, April, May, June, July and August 2020. Any funds received from you in this period will be adjusted against the repayments due.

Customers are requested to fill the below form to inform the bank that they DO NOT want to avail the moratorium on loan facilities. Different forms will have to be submitted for every loan facility.

Fieldset

 

Verification