EMI moratorium by banks: Non-uniform implementation raises questions
There are three repayment options for a borrower who is opting for a moratorium based on the accrued interest and principal amount or the deferred EMIs
- Apr 6, 2020,
- Updated Apr 9, 2020 3:58 PM IST
The Reserve Bank of India may have come to the rescue of coronavirus-affected borrowers by granting the three-month moratorium on term loans, there is a need for a clear and effective communication. Although banks have started offering the EMI holiday, they are not treating it in a similar fashion in terms of who needs it and how to recover it post the moratorium period.
Take, for instance, the moratorium scheme by the private lender ICICI Bank gives a message that a self employed or a rural and semi-urban customer needs it more desperately than a metro-urban credit card customer. So, they are offering an automatic moratorium option to all those customers. The bank has broadly divided the borrowers into two buckets of self employed or borrowers of a tractor loan and agri loans and a metro or more urban centric borrower of a home, car and a credit card. The former gets a default option of moratorium without filling any form or indicating his intention or the choices whereas the latter has to opt for a moratorium by clicking on a bank's link.
This in contrast to high street Standard Chartered Bank, a more metro and urban centric bank, which has decided to give a default option of moratorium to all its home loan customers. A default option means even if you have the capacity to pay, the bank is offering you a moratorium option. The onus is on borrowers to tell the bank that they don't need it. Quite strange.
Why different criterion for a same set of metro and more urban customers? Clearly, the trigger for a moratorium should be the default by any borrower whether metro, urban or rural. A loan default should automatically shift the outstanding to a three-month moratorium.
The Reserve Bank of India may have come to the rescue of coronavirus-affected borrowers by granting the three-month moratorium on term loans, there is a need for a clear and effective communication. Although banks have started offering the EMI holiday, they are not treating it in a similar fashion in terms of who needs it and how to recover it post the moratorium period.
Take, for instance, the moratorium scheme by the private lender ICICI Bank gives a message that a self employed or a rural and semi-urban customer needs it more desperately than a metro-urban credit card customer. So, they are offering an automatic moratorium option to all those customers. The bank has broadly divided the borrowers into two buckets of self employed or borrowers of a tractor loan and agri loans and a metro or more urban centric borrower of a home, car and a credit card. The former gets a default option of moratorium without filling any form or indicating his intention or the choices whereas the latter has to opt for a moratorium by clicking on a bank's link.
This in contrast to high street Standard Chartered Bank, a more metro and urban centric bank, which has decided to give a default option of moratorium to all its home loan customers. A default option means even if you have the capacity to pay, the bank is offering you a moratorium option. The onus is on borrowers to tell the bank that they don't need it. Quite strange.
Why different criterion for a same set of metro and more urban customers? Clearly, the trigger for a moratorium should be the default by any borrower whether metro, urban or rural. A loan default should automatically shift the outstanding to a three-month moratorium.