Scope and Objective
Our bank deeply cares for its customers. Many of our customers’ cash-flow and earnings may have been impacted because of COVID-19 crisis and on account of overall impact to the economy due to the lock-down imposed by the Government and the resultant restrictions on the movement of people, goods and resources. Thus the aim of this Policy is to extend relief to our customers based on permissions received as per RBI Guideline on COVID-19 – Regulatory Package dated March 27, 2020, April 17, 2020 and May 23, 2020.
RBI Policy Action: COVID-19 - Regulatory Package
RBI vide circulars issued on March 27, 2020, April 17, 2020 and May 23, 2020 has advised certain regulatory measures to mitigate the burden of debt servicing bought about by disruptions on account of COVID-19 pandemic and to ensure continuity of viable businesses.
Key highlights of the advisory are as follows.
Lending institutions have been permitted to allow a moratorium of upto six months. Neither is it an instruction by the RBI to the lenders, nor is it a leeway granted by the RBI to the borrowers to delay or defer the repayment of the loans. Hence, the moratorium will have to be granted by the lending institution to the borrowers.
The lenders are permitted to grant a moratorium on payment of any or all instalments falling due between March 1, 2020 and August 31, 2020.
Instalments permitted for moratorium will include payments falling due from March 1, 2020 to August 31, 2020 in the form of principal and/ or interest components; bullet repayments; Equated Monthly Instalments and credit card dues. Such instalment will also include instalments (originally due upto May 31, 2020) which were initially granted moratorium of upto three months.
Lending Institutions can use their own discretion to allow a moratorium of upto six months. It is not necessary to provide a moratorium of six months - it may be less than six months as well.
The moratorium is essentially a “pause” in contracted repayment obligations, however the interest will accrue and be payable by the customer.
Lending Institutions may defer the recovery of interest applied in respect of Working Capital Facilities (Cash Credit/ Overdraft) during the period from March 1, 2020 up to August 31, 2020 (“deferment”). Further lending institutions are permitted at their discretion, to convert the accumulated interest for the deferment period up to August 31, 2020, into a funded interest term loan (FITL) which shall be repayable not later than March 31, 2021.
In respect of working capital facilities sanctioned in the form of CC/ OD to borrowers facing stress on account of the economic fallout of the pandemic, lending institutions may recalculate the ‘drawing power’ by reducing the margins and/ or by reassessing the working capital cycle. This relief shall be available in respect of all such changes effected up to August 31, 2020 and shall be contingent on the lending institutions satisfying themselves that the same is necessitated on account of the economic fallout from COVID-19.
For all customers where lending institution has decided to grant moratorium or deferment and which were Standard as on February 29, 2020, even if overdue, the period from March 1, 2020 to August 31, 2020 will be excluded for counting the number of days past due, for the purpose of asset classification under the IRAC norms.
IDFC FIRST Bank approach
Our bank deeply cares for its customers and understands the difficulties customers are facing because of the COVID crisis. Hence we propose to provide the benefit of moratorium to customers who seek the same as per terms detailed in this note, without any additional charges whatsoever. Basis the above RBI guidelines, the policy adopted by IDFC FIRST Bank in this matter is as follows:
All retail customers who have availed of “instalment” loan such as home loans, vehicle loans, loan against property, two wheeler loans, business loans on instalments, personal loans, consumer durable loans, other such retail instalment loans prior to April 1, 2020 are eligible. Customers are advised that opting for the moratorium will result in interest being charged on the outstanding loan amount during the period of moratorium as well as the extended tenor of their loan and hence customers should avail it only if they are unable to service their loan.
Under this policy the Bank may allow a moratorium of up to six months on payment of instalments1.
Interest shall continue to accrue on the outstanding portion of such term loan during the moratorium period at the same rate as contracted for the respective loan.
The Bank will present the post-dated cheques / ECS or NACH mandates, debit customer account, etc., provided by the customers for collection on the respective due dates. In case the instalment is cleared by way of the instrument provided by the customer and presented by the Bank, then no refund will be issued. Moratorium if any will only be provided for subsequent instalment(s) on request of the customer. For rural customers please refer point f) below.
Customers who wish to avail moratorium should send an email from their registered email address to the Bank at firstname.lastname@example.org, quoting the Loan account number, five days prior to the due date.
For the month of March, April and May, all Rural and Agriculture customers were provided automatic moratorium. These customers shall be contacted in the month of June, 2020 to check if they would like to extend moratorium for another three months i.e. June, July and August or they would like to start repayments. If they wish to extend moratorium, the moratorium benefits include:
Deferment for paying instalments for upto 6 months.
Not reporting to bureaus as defaulter during the moratorium period.
No penal and bounce charges for instalments pertaining to the moratorium period.
For retail customers who have no overdues for period prior to March 1, 2020, but whose repayment instrument are not cleared on presentation between March 1, 2020 and August 31 2020, then such customers will be assumed to be impacted by COVID-19, and such customers will automatically be provided relief under moratorium, and hence moratorium related benefits mentioned above in point f) above would be made available to them. In case customers choose not to avail the moratorium, they can pay dues of the unpaid or returned instrument online to us.
In respect of all customers classified as Standard as on February 29, 2020, even if overdue, and where the moratorium on payment of instalment and/or deferment of interest has been granted, the period from March 1, 2020 to August 31, 2020 will be excluded for counting the number of days past due, for the purpose of asset classification under the IRAC norms.
The repayment schedule for such retail instalment loans who have been provided moratorium benefits will be extended to recover the deferred instalments, along with applicable interest. The interest will be accrued on a monthly basis would be added to the principal outstanding, which will extend the residual period of the loan as the EMIs would remain unchanged.
No penal or bounce cheque charges would be levied for borrower granted moratorium / relief under the policy during the moratorium period.
Corporate, SME and MSME (including Business Banking & Kisan Credit Card) customers who have availed working capital facilities from the Bank are also eligible for moratorium relief. Such customers can get in touch with their relationship managers and they may be provided relief under this policy based on review by the Bank, and as per the terms applicable to them. Relief can also be provided for term loans availed by such customers.
The Bank may defer the recovery, upto six months, of interest applied in respect of Working Capital Facilities (Cash Credit/ Overdraft) during the period from March 1, 2020 up to August 31, 2020 (“deferment”). The above accrued interest may be recovered immediately after the completion of this period or at the discretion of the Bank may be converted into a funded interest term loan (FITL) which shall be repayable not later than March 31, 2021.
In respect of working capital facilities sanctioned in the form of CC/ OD the Bank may recalculate the ‘drawing power’, by reducing the margins and/ or by reassessing the working capital cycle. This relief shall be contingent on the Bank satisfying itself that the same is necessitated on account of the economic fallout from COVID-19.
Such concession in reduction of margin would be valid in respect of all changes effected up to August 31, 2020 for such period as the Bank assesses or such extended time as per the impact assessment on working capital cycle. After such period, but not later than March 31, 2021, the margin would be reverted to pre-relief margin stipulated by the Bank.
For customers facing stress on account of the economic fallout of the pandemic, the Bank may re-assess the working capital cycle factoring the COVID19 impact on customer’s business. Such concession would be valid in respect of all changes effected up to August 31, 2020 for such period as the Bank assesses, maximum upto March 31 2021, as per the impact assessment on working capital cycle.
In case the working capital arrangement is under a Consortium, the reassessment of limits will need to be harmonized with the assessment of the Lead Bank of the Consortium, including at a later stage.
1 Instalments will include the following payments falling due from March 1, 2020 to August 31, 2020: (i) principal and/or interest components; (ii) bullet repayments; (iii) Equated Monthly instalments; (iv) credit card dues.
Criteria that may be considered for providing above mentioned relief
Issues in borrower’s operations including on account of manpower, demand, supply chain, procurement, manufacturing, sales, collections, reschedulement or cancellation of orders, etc. on account of COVID-19 pandemic that will have an impact on profitability / cash flows.
Deterioration in overall financial profile i.e. revenues and / or cash flow owing to fall out of the COVID-19 pandemic including foreseeable elongation of working capital cycle due to increase in inventory and debtors / receivables.
For Borrowers whose main business is to on-lend, their borrowers may face similar issues as listed above, leading to liquidity issues for them, which can be considered by the Bank.
dInability to conduct business or provide services, shutdown of unit or workplace on account of disruption due to COVID 19 pandemic impacting the ability to service debt.
Other criteria that may be relevant based on case to case basis depending on the circumstances of the specific case based on the assessment and comfort of the Bank.
Other applicable conditions
The Bank would provide separate terms and conditions for different types of loan. Other credit conditions in the sanction letters already issued would remain unchanged.
In respect of reliefs granted under this policy, requisite documentation may be taken by the Bank, including through electronic form.
If borrowers have already paid their instalments or serviced their interest for March 2020, such borrowers can avail moratorium for instalments falling due between April to August 2020.
The Bank will take into account the stress on the borrowers on account of the pandemic when deciding on whether to provide moratorium benefits.
The borrower should not be under IBC proceedings or have been classified as wilful defaulter/ RFA/ Fraud by any Bank or financial institution.
The moratorium/deferment granted to borrowers will not qualify as default on the part of borrowers for the purposes of supervisory reporting and for reporting to credit information companies (CICs).
The relief given as above as per the special dispensation given by RBI will not result in any downgrade of asset classification, in line with extant RBI Guidelines.
While this policy outlines the broad internal guidance that the Bank will follow to take decisions regarding moratorium, the Bank retains the discretion to change the policy from time to time and announce it appropriately on its website.
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