Most of our salaried borrowers haven’t opted for the loan moratorium: Bank of Baroda

It has been a month and half since the Reserve Bank of India had announced the loan moratorium for those facing a cash crunch due to the COVID-19 pandemic. Have many people opted for it? And were they made aware that this is merely a deferment, and not a loan holiday? Shanti Lal Jain, Executive Director, Bank of Baroda tells Moneycontrol’s Hiral Thanawala that borrowers who haven’t suffered a cash crunch need not opt for the moratorium. Excerpts.

What percentage of your borrowers has opted for loan moratorium? What is their profile (salaried, self-employed, professionals, etc.)?

This loan moratorium has given a respite to the borrowers whose cashflow is affected due to the COVID-19 lockdown. Most of the salaried borrowers have not opted for the moratorium. Just about five percent of this class has opted for the moratorium. But nearly 90 per cent of our entrepreneurs/businessmen/professionals  borrowers have opted for the moratorium. That’s a segment that has seen a large impact on their cashflows.

What is the process for taking the loan moratorium and applying for refunds if the EMI instalment were already deducted?

After we informed all our customers through text messages to their mobile phones, giving them the option for taking the loan moratorium, many availed it. We refunded their March instalment that had already been deducted before the RBI announced the moratorium.

Whoever did not opt for the moratorium (borrowers had to reply to their text messages as per instructions) continue to pay their EMIs as usual.

Do you see similar trend with other banks as well in opting for the loan moratorium? 

Yes; more or less, the trend is expected to be similar with other banks as well.

Many borrowers had misunderstood initially that the loan moratorium was an EMI holiday. Were your customers who opted for the moratorium aware of the consequences?

Yes; customers who have opted for loan moratorium are aware of the consequences. They understand that interest will continue to be charged in their accounts on the outstanding amount.

We have educated our customers by publishing a set of frequently asked questions about the loan moratorium on our website. We have mentioned that this is a loan moratorium and that there is no waiver of interest. Further, we have explained with an illustration on how an outstanding amount will continue to accrue interest. We have consistently advised our customers that if their cash flows are not adversely impacted, they must continue to paying their EMIs.

Do you think the Reserve Bank of India (RBI) will extent the loan moratorium?

The government has twice extended the lockdown already. From May 18, we will be in lockdown 4.0 with new rules. After the lockdown, restarting businesses will take time to return to sales realisation. It will not happen in a short span of time. So, it will be difficult for businessmen, self-employed or professionals to generate income in the remaining days of May and start repayment of EMIs from June onwards. Under the circumstances, we expect the RBI to announce an extension of the loan moratorium for the near term.

The home loan interest rates are at a two-decade low. Will new borrowers seek loans as there may be a correction in real estate prices? What is your advice for them?

The salaried group’s cashflow is not impacted due to COVID-19. It is expected that the correction in real estate prices may happen in the near term. To them, this is the time to buy a house or opt for a bigger place, as interest rates are at their lowest in almost two decades.

In light of the growing risk aversion due to the COVID-19 fallout and YES Bank crisis, have you seen a significant increase in fixed deposit accounts and amounts deposited, in March and April?

We have seen a growth in current, savings and retail term deposit accounts, collectively at around 8-9 per cent on a year-on-year basis, which is the normal growth range for our bank. We didn’t a significant spike in fixed deposit accounts and amounts deposited in the last couple of months. This could be due to reduction in the fixed deposit interest rates after RBI announced a 75 basis points repo rate cut in March.