Borrowers face hurdles from EMI moratorium
3 min read 29 Jul 2020, 09:43 PM ISTSome borrowers on moratorium saw EMI deduction and the levy of ‘bounce’ chargesMany customers are facing problems due to lack of standard procedures followed by lenders
PremiumWhen Noida-based Sriram Natarajan, 33, who works in the hospitality sector, faced a salary cut of 40% in March, he applied for a moratorium from March to May on his personal loan. He got a refund for March. He once again applied for the moratorium when the Reserve Bank of India (RBI) extended it till August. But Natarajan’s bank allowed him to apply for the extension only two days before his equated monthly instalment (EMI) due date of 5 June. His EMI was deducted by the bank for the month of June and he got the refund a month later, that too after several emails and multiple follow-ups.
Due to lack of proper infrastructure and shortage of staff, some lenders have struggled to cater to the large volume of requests for EMI moratoriums. Like Natarajan, several others have faced a delay in refunds of EMIs, lenders deducting EMIs even after borrowers have opted for moratorium, charging EMI bounce charges, and so on.
We tell you some of the common problems being faced by borrowers and the recourse available to them.
EMI deduction
Many borrowers are complaining that their EMIs were deducted even though they opted for the moratorium. “This is a common problem borrowers are facing. This could happen due to delay in opting for the moratorium by the borrower or delay on the part of bank in processing the request due to shortage of staff and lack of appropriate systems," said Raj Khosla, founder and managing director, MyMoneyMantra.com, a Delhi-based financial services provider.
Natarajan’s bank deducted his July EMI too, even though he had opted for the moratorium within the specified time frame. Banks generally ask borrowers to opt for moratorium five to seven days before their EMI due date. He has raised a request with his bank but he was yet to receive a refund when we spoke to him last.
Now, Natarajan is wondering whether the bank will charge him additional interest for the entire period despite the fact that EMI for the month of June was deducted and refunded only in July.
Experts advise that borrowers should approach the respective banks to get the issue resolved. “If the refunds are delayed even if the borrower applied for the moratorium in time, then banks should ideally not charge the interest for that period. For any concerns regarding untenable charges, the customer must contact the bank’s customer care. The resolution is provided mostly within seven days," said Khosla.
EMI bounce charges
Banks levy a penalty fee on the borrowers if they miss paying their EMI. However, they are not allowed to levy these charges from borrowers whose EMI moratorium request has been approved.
“During this six months’ time, banks are not expected to raise any demand by way of NACH (National Automated Clearing House), cheque collection, ECS, auto-recovery and standing instruction from borrowers whose EMI moratorium request has been approved," said Babu K.A., senior vice-president, Federal Bank.
Some of the banks are taking corrective actions in such cases. “As per the bank’s policy, the applications that are approved for moratorium will not be levied any bounce charges. If any such charges are levied, necessary corrective steps are being taken by the bank and future EMIs are not presented for payment during the moratorium period," said Rohit Rao, chief communication officer, Kotak Mahindra Group.
If your bank has not reversed the charges on its own, request the bank to do so. In most cases, it will happen, but if it doesn’t, you can approach the RBI ombudsman.
Other problems
Chennai-based Shiv Shankar, 34, who works in the sales division of an electronics company, opted for EMI moratorium for April as a precautionary measure. However, as he didn’t face any pay cut, he decided to pay his EMI on 18 April instead of the due date of 10 April. Coincidentally, that was the last EMI he was supposed to pay towards his loan. However, his bank deducted another EMI next month and also slapped extra interest. Now, he is struggling to get the additional money refunded.
“In principle, the moratorium was never an interest waiver, so if a person has delayed EMI payment, he or she is liable to pay interest for the time the EMI was delayed. If the borrower thinks additional interest is charged, he or she can approach the bank to get it reversed," said Adhil Shetty, CEO, Bankbazaar.com.
Many customers are facing problems due to the lack of a standard procedure followed by lenders and lack of clarity about the moratorium rules. So it’s important to know the rules around moratorium (see graph). It is also important to find out the guidelines of your bank as different banks may have different procedures.
Disha Sanghvi contributed to the story
