The repayment schedule for such loans along with the tenor will also shift by 3 months after the moratorium period. The interest for this period will continue to accrue on the outstanding portion of the term loans during the moratorium period.
RBI in its Bi-monthly monetary policy statement issued on the 27th of March 2020 brought in certain regulatory measures to mitigate the debt-servicing burden on borrowers in view of the disruptions brought out by the COVID-19 crisis.
The relief provided by RBI allows borrowers, account holders, credit card holders a one-time opportunity to re-schedule their payments by way of the moratorium of 3 months on payment of all term loan installments which are falling due between March 1, 2020, and May 31, 2020. This include all principal and interest payments, EMIs, credit card dues, and bullet repayments. The repayment schedule for such loans along with the tenor will also shift by 3 months after the moratorium period. The interest for this period will continue to accrue on the outstanding portion of the term loans during the moratorium period.
To pass on the relief various banks are revising their policies for the borrowers. Kotak Mahindra revised their bank’s policy for providing the said relief to borrowers. All credit facilities of the Bank outstanding as on March 31, 2020, will be extended by 3 months, however, this will not be applicable to loan disbursements to be made in April 2020 and thereafter. Kotak bank will provide separate terms and conditions for different types of loans. This extension will be offered to all borrowers who want to avail of the facility of the moratorium.
Note that the bank would be charging the interest, at the originally approved rate, for the moratorium period on the outstanding amount of loan.
As the repayment of term loans will be re-scheduled and shifted by up to 3 months and the tenor of the term loan will be extended, the EMIs will be appropriately recalculated, including interest during the moratorium period. If a borrower has already paid their off their installment for the month of March 2020, such borrowers can avail the moratorium relief for installments falling due in April and May 2020.
Borrowers who want to avail the relief under the RBI circular needs to let the bank know of their decision within seven days (or an extended date as may be permitted by the Bank) through a mail from their registered mail id, from their first due date falling on or after April 1, 2020.
This relief will also be extended to credit card users whose first statement falling due on or after April 1, 2020. Cardholders who have not paid their total amount due, as payable in the months of March, April, May would be automatically enrolled for the moratorium.
Having said that, if there is an existing default on the behalf of borrowers like interest or principal due up to February 29, 2020, the usual asset classification and provisioning norms will be applicable. The accumulated interest for the 3-month period has to paid by the borrower immediately after the moratorium period.
Additionally, the bank will also consider a reduction of margin on stocks, receivables, other eligible securities, etc., for computation of Drawing Power (DP) for OD/CC limits and allow higher DP than earlier, which will be based on impact on borrower basis due to credit assessment. After the moratorium period, the margin would be reverted to the pre-relief margin stipulated by the bank.