After the Reserve Bank of India (RBI) permitted all lending institutions to allow a three-month moratorium on payment of instalments of term loans, the State Bank of India (SBI) clarified that the deferment of EMIs for term loans will be automatic.
Clarifying his views on the RBI policy announcement, SBI Chairman Rajnish Kumar on March 27 said, "Instalments will get automatically deferred by 3 months for term loans and customers don't have to apply to banks for it."
"Banks can formulate own policies on new loans keeping borrowers' repayment capacity into account," Kumar added.
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The SBI chief stated that the accrual of income does not stop while there is a dispensation on recovery.
In a policy statement, RBI Governor Shaktikanta Das said, "All commercial banks (including regional rural banks, small finance banks, and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1."
Further, in order to provide some relief from the damage caused by the deadly coronavirus, the central bank also decided to defer interest payment on working capital loans by three months for lending institutions.
On this, the SBI chairman clarified that it would be up to the banks to allow flexibility around working capital. However, working capital limits will be assessed on a case to case basis, he said.
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Kumar, who is also chairman of the Indian Banks' Association, said that the RBI's steps were necessary and would help kick-start the economy.
Amidst the economic slowdown fears due to the outbreak of coronavirus, Kumar said that he had never seen such a situation before with the entire country on lockdown for 21 days.
The situation will impact cash flows across segments and there may be job losses too, he said.
Further, he said that the SBI was not closing down its branches.
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"Wherever areas have been quarantined, we have closed branches on district authorities' orders. Customer service, bank branches are operational and will continue to provide services. There is sufficient cash across branches and ATMs," Kumar clarified.
He also appealed people to withdraw only to the extent necessary.