SBI is going to have a strict check on eligibility, the bank is going to evaluate whether the customer is affected by the pandemic or not. Borrowers who either have lost their jobs or suffered steep pay cuts will now be able to work on a new loan recast scheme banks. State Bank of India (SBI), the country’s largest lender, plans to give lenders a repayment break, provided they meet the bank’s requirements.
According to some sources, the bank has identified three categories for personal loan restructuring. The Reserve Bank of India (RBI) had previously allowed personal loans to be restructured, including the granting of a moratorium on borrowers impacted by Covid-19. The bank is working on a proposal approved by the board to restructure personal loans by 31 August. Management is also mulling to pass on costs of provisioning personal loan restructuring.
The recast of the loan will result in higher provisioning costs for the lender, but as of now, it is uncertain who will bear the burden. According to RBI guidelines, the bank would have to make ten percent provision of capital for personal loan resolution. According to a staff of SBI, there’s a service factor of ten percent, they didn’t agree on that.
The length of the moratorium’s periodicity will be decided by the financial effect on the consumer due to Covid-19. Whoever has a pay cut, let’s say by 25 percent, we may assume you are taking a moratorium for three months. Suppose a retail borrower has lost his employment, the bank will be able to offer a six-month moratorium. Standardization should be product-wise, whether by the source it is a home loan, a car loan or an individual loan. By a strict eligibility test, the bank will determine whether or not a client has been affected by the pandemic. For example, there should be some evidence in the case of salaried class lenders that the borrower did not earn a salary or had a pay cut.
RBI, in the first phase, allowed lenders to grant borrowers moratorium relief for three months from March 1. In the second phase, it extended the moratorium period by three months, until August 2020.Krishnan Sitharaman, senior manager, Crisil said borrowers under a personal loan restructuring scheme could be lower than existing moratorium customers. Most of the customers have a moratorium on cash conservation. The rating agency expects banks to raise their retail non-performing assets (NPAs) after August.
