SBI Plans To Offer Moratorium To All Term Loan Customers

SBI will offer the moratorium to all customers rather than making individual assessments.

Pedestrians and an auto-rickshaw pass a State Bank of India Ltd. (SBI) branch in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)  
Pedestrians and an auto-rickshaw pass a State Bank of India Ltd. (SBI) branch in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)  

India’s largest lender State Bank of India is likely to offer a three-month moratorium to all its term loan borrowers, as a way to ensure the quick pass-through of relief measures announced by the Reserve Bank of India.

SBI will offer the moratorium to all customers rather than making individual assessments, two senior officials told BloombergQuint on condition of anonymity. The moratorium will also be offered to working capital facilities availed by micro, small and medium enterprises, the officials said.

Borrowers who are not impacted by disruptions related to Coronavirus can opt-out and continue to make payments after informing the bank, the officials said.

India’s largest lender is of the opinion that a selective approach toward implementing the moratorium could be too cumbersome and delay the relief, the people quoted above said.

The bank will also extend the relief to securitised loan pools that it has purchased with underlying assets that qualify for the moratorium, the officials said.

As part of its plan the bank will initiate a special communication campaign, detailing the specifics of the moratorium and how it would impact a borrower’s repayment schedule. Through the campaign, the bank would also encourage borrowers to opt-out of the moratorium if they have not witnessed any disruption in their income and are capable of repaying their loans on time.

The bank’s board will meet later this week to finalise the implementation of the moratorium and come out with a standard operating procedure, the bankers quoted above said.

Response to a query emailed to SBI on Monday evening is awaited.

During a conference call with reporters on Friday, SBI Chairman Rajnish Kumar had said that repayments worth Rs 50,000-60,000 crore could fall under the three-month period between March 1 and May 31. The bank will not suffer any profitability issues due to the moratorium, since the interest earned on these loans is only an accounting entry.“We will continue accruing interest on the loans as per RBI guidelines, just that the cash will be received at the end of the 90 days,” Kumar said.

As of December 31, 2019, SBI’s total domestic advances stood at Rs 19.78 lakh crore. Of this, Rs 7.19 lakh crore were to retail borrowers, Rs 2.09 lakh crore to agriculture borrowers, while SME borrowers had outstanding loans worth Rs 2.78 lakh crore and large corporate borrowers owed Rs 7.71 lakh crore to the bank.

On Friday, the Reserve Bank of India allowed lenders to offer three-month moratorium but left it to bank boards to decide the final contours of the policy.

As part of the moratorium, lenders can push the repayment schedule of a term loan or working capital facility by three months, without downgrading the asset classification of the borrower. The borrower’s credit history or credit rating will also not be affected by the moratorium, said the regulator.

However, the interest on the repayments will continue to accrue for this three month and the borrowers will have to repay their lenders after that period ends. The moratorium can be applied to any term loan installment, the RBI said. Retail and corporate loans, equated monthly installments, bullet repayments and credit card dues will be covered under the moratorium, as per the RBI’s detailed circular.

Some examples of loans on which borrowers can seek relief include home loans, auto loans, loans against property, project loans, construction finance, etc. According to data released by the RBI, as of January 31, total non-food credit from the banking system stood at over Rs 89 lakh crore, which included nearly Rs 25 lakh crore in retail loans, Rs 4.8 lakh crore in MSME loans and Rs 23 lakh crore in loans to large industry