Government aided COVID Relief for Loan repayment

The RBI’s EMI moratorium was available to the borrowers for six months which ended on August 31. Restructuring is now available to the borrowers. Under this restructuring framework, the moratorium will be in addition to the moratorium granted by the banks earlier. During the moratorium period, the EMIs were not required to be paid by the borrowers. Till now only HDFC Bank, State Bank of India, and ICICI Bank have set out their terms for Loan Restructuring Scheme.

Following are the details of Loan Restructuring Scheme of SBI

1. Moratorium Extension : State Bank of India (SBI) has already come out with a restructuring policy under which the loan can be rescheduled and the moratorium can be further extended for a period of 24 months. As far as the EMI moratorium is concerned, the borrower may get the moratorium for a period of up to a maximum of 24 months. The installments will get rescheduled and the extension of tenure will be for a period equivalent to the moratorium granted subject to a maximum of 2 years.
2. Loans covered under the category: Housing and other related loans, education loans, auto loans (other than loans for commercial use), and personal loans are covered.
3. Interest during moratorium: During the moratorium, the borrower does not need not pay EMIs on the loan,but, the interest will be applied during the Moratorium period. If one has to opt for the EMI moratorium but still want to keep the interest burden lower over the 2-year moratorium period, it is better to keep paying as and when one has funds. Any surplus cash during the moratorium can be paid back to keep interest costs lower.
4. EMI Extension period: The extension period of the loan will depend on the type of loan that a borrower is taking. It may be a personal, home, or credit card loan. In any case, the tenure of the loan can be extended only up to a maximum of 24 months for COVID-19 related financial stress.
5. Interest rate calculation: Once one opts for the moratorium, the EMI calculation will be done again. If the moratorium is approved, the loan tenure will be extended by the period of the moratorium and the EMI payable after the moratorium will be recalculated by the bank. And, not just the re-calculation of EMI, there be a change in the pricing of the loan. One will be required to pay additional interest of 0.35 percent per annum over and above the current pricing for the remaining tenure of the loan. This is in order to offset the partial cost of additional provisions required to be made by the Bank. There is, however, no processing fee being charged by the bank.

How to apply for Loan Restructuring

To apply for the moratorium, the loan should be a ‘standard account’ as on the date of application for relief under this framework and should have been ‘standard’ and also not in The default for more than 30 days as of 01.03.2020. A borrower will be considered as affected by the COVID-19 pandemic if any of the following conditions are fulfilled:

1. Salary or income in Aug 2020 has got reduced when compared to Feb 2020
2. Reduction or suspension in salary during the lock down period,
3. Job loss/closure of business or
4. Closure during a lock down or reduced activity of units or shops or business establishments in case of self-employed or professionals/businessmen.

Documents required for Application

Here are the lists of the documents that need to be uploaded if you are applying online:

1. Salary slips for the month of Feb 2020 and current/latest salary slip.
2. A declaration of estimated salary/income immediately after the end of the desired moratorium period (Maximum 24 months).
3. Letter of discharge from a job (in case of job loss).
4. Account statements of the account where salary is credited in case of salaried employees or statement of Operating Account in case of businessmen or self-employed or professionals for the period Feb 2020 till 15 days prior to submission of application.
5. Declaration by self-employed professionals/ businessmen declaring that their business is affected by COVID-19.

The last date to apply for relief under the loan-restructuring scheme is December 24, 2020.

Check out SBI website link for detailed information.

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