State Bank of India, the country's largest lender, gave a three-month relief to borrowers under its settlement schemes amid the coronavirus crisis today. This came days after the Reserve Bank of India (RBI) said that all lending institutions, including banks and housing finance companies, will have to give its borrowers a three-month moratorium on term loans. In an exclusive conversation, India TV Digital spoke to SBI Chairman Rajnish Kumar who explained at length on the moratorium rules. During the interview, Kumar advised people to pay their EMIs if they have the ability and cash flow, in order to avoid any additional cost.
As per a statement from SBI, for an auto loan of Rs 6 lakh with a remaining maturity of 54 months, the additional interest payable would be around Rs. 19,000 equal to an additional 1.5 EMIs. Explaining the same, Kumar said this is the reason why the impact in the case of a car loan is much lower...because of the shorter repayment period. In essence, shorter the remaining period of the loan, lower the impact."
Elaborating on the impact on a home loan, the SBI Chairman said for a loan of Rs 30 lakh with a remaining maturity of 15 years, the net additional interest would be approximately Rs 2.34 lakh which is equal to eight EMIs. Kumar said the impact of deferment depends upon when will the deferred amount be paid by the customers. It is presumed that is being paid at the end of your existing loan period, the SBI Chairman said.
He clarified that the impact of deferment depends upon when the amount deferred is paid by the customers. So, as a customer, you must note that this loan deferment will cost you in terms of extra interest. The interest on the deferred period will be charged to you later on, depending on when you pay. Due to the compounding interest, it may impact you with up to 8 additional EMIs. "Only in case of a liquidity crunch, you may opt to avail this."
One must understand that the interest on the loan will be added to the extended period of EMI moratorium. On the outstanding amount of loan, the three-month EMI interest will add on, which will have to be paid afterward, along with the extended period. In order to avoid the extra interest, it is advisable to pay the EMI/installments on time if there is enough liquidity.