Customer will suffer double shock for not paying EMI for six months

RBI has given a 6-month concession in EMI repayment to provide relief to the loan holders affected by the lockdown and corona epidemic. At a glance, this announcement looks quite comfortable but experts say that the interest on the loan will keep going during this period, which can cause a double blow to the borrowers in the coming time. This is the reason that in the first round of concession, only 20 per cent of SBI customers opted.

The impact on the ability to borrow can be said by

banking experts, though the debt of the customers who choose not to repay EMI is not covered by NPA nor will there be any impact on their CIBIL. Despite this, it is going to have an impact on their ability to borrow for the next one year.

Banks will be cautious in lending.

Banks will  be very cautious in lending to such customers and will hesitate to give them new EMI based loans or increase their loan limit. Many bank officials say that there is doubt on the ability of such customers to repay the total EMI after the concession period has passed. Also, there will be uncertainty over the next few years on the stability of the business of customers taking business loans.

Customers availing EMI concession from the bank can be given three options for payment.

• 1- At the end of the concession, these six months’ total interest will be paid in a lump sum.
• 2- The total interest will be added to the outstanding loan and accordingly the EMI amount will have to be paid in the remaining period of repayment of the loan.
• 3- The total interest will be added to the outstanding amount of the loan and EMI amount will be same as before but the repayment period will be extended.

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Interest may also have to be paid
During the announcement of interest reliefs, RBI Governor Shaktikanta Das has clearly stated that the customer will have to pay the interest for the period of exemption in EMI payment. Banks can convert this interest into a separate term loan, so that there is no change in the EMI of the loan already running.

If banks follow this suggestion, the customer may also have to pay interest on the outstanding interest under the term loan rules. This means that if someone’s EMI of 20 thousand includes interest of 13 thousand rupees and he opts for six months concession. So, he may have to pay separate interest on the total interest of 78 thousand rupees.

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