The Housing Development and Finance Corporation (HDFC), the country’s largest mortgage lender, and some other lenders will reach out to customers and give them the option to skip equated monthly instalment (EMI) for the next three months as announced by the Reserve Bank of India on Friday.
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The move will enable customers, particularly those who have opted for the electronic clearing service (ECS) facility, to opt for deferring payments for the next three months.
“We will give our customers an option to defer EMIs,” Keki Mistry, vice-chairman and CEO, HDFC, told The Hindu.
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HDFC will reach out to its customers via email and SMS, informing them to exercise their choice through a link in their website. The customer will also have the option to continue with the EMIs.
Private sector lender Kotak Mahindra Bank has also communicated through social media that the bank is working on the issue and will inform the customers via email and SMS.
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The other alternative for the borrower to defer EMIs is to instruct the bank from where the EMI is debited to stop the ECS facility.
A borrower who has not opted for the ECS facility can simply avoid paying the instalment for three months.
On Friday, the RBI allowed all banks and financial institutions including non-banking finance companies to extend a three-month moratorium on the instalments falling due between March 1, 2020 and May 31, 2020 for all term loans.
Consumer loans
This relaxation is also applicable for consumer loans like auto loans, home loans and personal loans, as well as credit card outstanding.
This would mean a consumer may choose not to pay monthly equated instalments on their loans for the next three months.
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The move is a part of several measures announced by the central bank to fight the economic impact caused by a nationwide lockdown enforced due to the outbreak of COVID-19.
Lenders will not have to classify the borrower account as non-performing due to the relaxation, RBI had said. There will also be no impact on the borrowers credit score.
Interest to accrue
The banking regulator has clarified that interest will continue to accrue on the outstanding portion of the term loans during the moratorium period.
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“Customers need to understand that moratorium is not a waiver of any kind but just a facility provided to customers to tide over their temporary liquidity issue and once the moratorium period is over , they will need to repay the loan with accrued interest,” said an official of a housing finance company.
