MUMBAI: Lack of communication from private banks regarding a three-month moratorium on all term loans has left retail borrowers from these entities a confused lot.

On Friday, the RBI allowed banks to give a three-month moratorium for repayment of all term loans due between Mar 1 and May 31, without tagging the borrower's account as a non-performing asset. This was to help borrowers tide over any economic impact stemming from the COVID-19 pandemic. Borrowers are also unsure whether any such moratorium will have certain eligibility criteria.

"There is a lot of confusion among borrowers about... the moratorium and how to go about arranging matters to your preference," said Adhil Shetty, chief executive officer at BankBazaar, a financial services marketplace.

"For instance, some people wish to pay their EMIs on schedule despite an option to get it extended. Others are worried about payments that were missed earlier in the month before the moratorium, and the implications of that."

According to analysts, most borrowers are of the view that banks, especially private sector lenders, are likely to choose the 'opt-in' policy rather than 'opt-out'. Under the opt-in policy, customers who want to avail of the moratorium will make an application to the bank, knowing the terms of the scheme.

State Bank of India Chairman Rajnish Kumar said the instalments for term loans would be automatically deferred by three months, and customers would not have to apply. This means the bank is offering the grace period in good faith and assuming that customers are indeed impacted by the economic fallout of COVID-19.

The onus will be on customers to 'opt out' if they are in a position to repay. Similarly, Bank of Baroda is offering the moratorium on all loan instalments, increasing the residual period of the loan by three months.

In case the borrower wants to opt out, she will have to suitably inform the base branch, the bank said. Syndicate Bank is also giving across-the-board moratorium on term loan repayments. Indian Bank, UCO Bank, and Union Bank of India have also made similar announcements.

State-owned lenders are also offering emergency credit lines to companies hit by the nationwide lockdown. Meanwhile, private sector lenders are yet to reach out to customers in a meaningful way, and are still finalising their customer-outreach policy.

According to BankBazaar's Shetty, since this is the first instance of such a moratorium, lenders need a little time to understand and plan how to execute this and, hence, are taking it slow. There are several things lenders need to consider, such as calculating the interest due, the actual mechanism of implementing the moratorium, and communicating with credit bureaus. "That is what is delaying the communication from the banks," he said.

"The plan is to engage with customers and guide them in availing of the benefit only if they are impacted by the lockdown. This will ensure that future asset quality problems are minimised to the extent possible because the full impact of the lockdown still can't be assessed," said a senior banker with a private lender.

Personal finance advisors are telling customers to not avail the forbearance if they have adequate liquidity to pay instalments. This is because most people may confuse the rescheduling, given in the form of temporary cash relief, with a waiver on interest.

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