SBI clarifies loan payment deferral will come at a cost

State Bank of India (SBI) on Wednesday clarified that the rescheduling of term loan payments will come at some additional cost and those with the ability to make payments should continue to do so. The clarification came after the central bank last week directed banks to provide a three-month moratorium on term loan repayments to help borrowers mitigate the impact of the Covid-19 outbreak. The payments deferral will apply on payments due between March 1 and May 31.

The bank’s management clarified that the facility would be a deferral of payments, rather than a waiver, and would consequently come at a cost. However, the additional cost accrued will be back-ended during the repayment period. “Any deferment of interest over such a long period, if it is there, will entail additional cost because it is not interest waiver, it is interest deferment,” said Challa Srinivasulu Setty, managing director, SBI. An example given on SBI’s website showed that for a home loan of Rs 30 lakh, with a remaining maturity of 15 years, the net additional interest accrued on account of deferral of payments may amount to around Rs 2.34 lakh, which is an equivalent of eight equated monthly instalments (EMIs). “If you have the ability and cash flow to pay, it makes sense to pay this amount to avoid the costs. But the important thing is that, if you want additional cashflow, you avail this facility, and it costs you,” Setty said.

The lender clarified that for those customers who have already paid in March and want to avail a refund, the facility would be available as well. “There are two-three types of customers. There are customers who have given standing instructions to us, he has a loan account with us, as well as a savings and current account with us, every month his savings account is debited and credited to our loan account. We told them simply to send an email, we will ensure that whatever amount that has been recovered by March will be credited to your savings account,” Setty said.

Another category of borrowers, who have taken loans from SBI but have an account in a different bank, SBI will take some time to stop the automated clearing house (ACH) facility, which is in place. Customers will have to send in writing to the bank seeking a refund, Setty said. “We have given this provision of claiming back the amount that has been already paid by March. Only challenge is that because we may get hundreds of such requests and it has to be done manually, because the system enabler is not in place, it may take 7-10 days to effect the credit,” Setty said.

Last week, the bank also announced an emergency credit line for Covid-related to help stressed borrowers deal with the pandemic-outbreak related financial stress. Setty said that the facility has seen good interest from borrowers. “We are still compiling the data on how many people have availed this facility, but there is good amount of interest coming from various customers expressing their requirement for this credit line,” Setty said, adding that authority to sanction the facility has been given at the operating level itself and need not come for approval to the credit committee. The facility is available for 12 months, and interest will be charged at the Marginal Cost of Lending Rate (MCLR). “After a six-month moratorium, they will pay in six-monthly instalments,” Setty said. He added that the facility, which will provide funds up to Rs 200 crore, can be availed at any time till June 30. “If the MCLR is reduced during this period, (the customer) will get the benefit. Our interest is calculated on daily balances,” Setty said.