Private banks, NBFCs to continue EMIs, if not informed

Unlike the public sector banks, customers of private banks and non-banking financial companies (NBFCs) would continue to pay EMIs on their term- loans unless a specific instruction is issued, as per the Covid-19 RBI package.

Several private banks and NBFCs informed their customers on Wednesday that auto debit facility for loan instalment won't be cancelled. If a customer wants to hold equated monthly instalments (EMIs) for three months, they will have to specify that by sending an e-mail to the bank/NBFCs.

"Relief package, #ICICIBank offers its customers a choice of either paying towards their loans/credit facilities or opting for a moratorium till May 31, 2020. Customers are requested to visit icicibank.com to specify choice," the private lender tweeted.

However, most public sector bank have operationalised three-month moratorium without asking customers. Regular EMIs will continue once the customer specifies that he's willing to pay.

Other lenders, like HDFC Bank, Tata Capital, Edelweiss, Bajaj Finserv, RBL Bank, Adi's Bank, IndusInd Bank, Deutsche Bank, Rattanindia and Indiabulls, have announced specific email IDs where a customer will have to write to indicate the repayment choice.

With information on EMI deferment coming in April, most customers will get the deferment benefit of just two months (April and May) unless they have defaulted on paying the March instalment.

Banks have also posted mailers and FAQs on their sites informing customers about the scheme.

Many customers are expected to opt out of the EMI deferment as during the moratorium period interest will continue to accrue on the term-loan's outstanding. The interest accrued will be added to the outstanding and the repayment schedule for the residual tenor will be shifted across the board by three months after the moratorium period.

But you must take into account that under the scheme, interest on loans, though not mandatorily payable immediately, gets postponed by three months, continues to accrue, raising the loan cost.

To give a perspective, suppose your loan outstanding is Rs 1,00,000 and you are charged 12 per cent interest, then every month you are liable to pay Rs 1,000 as interest. If you opt not to service the interest every month, you are liable to pay interest at 12 per cent and accordingly you will pay Rs 3,030.10 at the end of the third month. Similarly, if the interest rate is 10 per cent, you are required to pay Rs 833 a month or Rs 2,521 after three months.

In the case of credit card dues, there is a requirement to pay minimum amount. If not paid, it gets reported to credit bureaus. In view of the RBI circular, the dues in the credit card account won't get reported to the credit bureaus for three months. But an interest will be charged by the card issuer on the unpaid amount.