Kotak Mahindra Bank Increases Moratorium on Term Loan Instalments and Credit Card Dues Till 31st August, 2020
Kotak Mahindra Bank had earlier implemented the Board approved policy for granting relief to the borrowers affected by COVID 19 pandemic as per the Reserve Bank of India (RBI) regulations dated 27.03.2020 and 17.04.2020.
RBI, now, vide its circular dated 23.05.2020, has permitted the banks to extend the moratorium for further 3 months from 01.06.2020 till 31.08.2020. Banks are required to have an approved policy by the board for the same.
During the last few weeks, the Government of India has announced various measures to kick-start the economy and has granted a fund of Rs. 20 lakh crore (about 10% of India’s GDP) to bring the economic activity back to stability.
Below are some questions and answers regarding the extension of moratorium by RBI and Kotak Mahindra Bank:
✅ What is the new applicable moratorium period?
As per the relief provided by RBI, the bank has extended the moratorium by another 3 months, i.e., from 01.06.2020 to August 31, 2020.
✅ For which credit facilities the moratorium is applicable?
The moratorium is extended for payment of:
- All instalments of term loans (including agricultural term loans, crop loans, and retail loans). The repayment schedule and residual tenure for these loans will be accordingly shifted across the board. Interest will continue to accrue on the outstanding part of the term loans during the said moratorium period.
- RBI has permitted banks to provide a deferment of another 3 months with respect to the working capital facilities provided in the form of cash credit or overdraft (CC/OD), from 01.06. 2020 to 31.08.2020, the on recovery of interest applied to these facilities. Banks are also allowed at their discretion to convert the said accumulated interest for the deferment period into a funded interest term loan or FITL, which shall be repayable up to maximum 31.03.2021.
✅ What will happen to the ‘drawing power’?
RBI, as a one-time measure, has permitted banks to recalculate the ‘drawing power’ by reducing margins until 31.08.2020. However, in all such cases, where a temporary enhancement in drawing power will be considered, the margins will be restored to the original levels by 31.03.2021; and/or, the working capital sanctioned limits up to 31.03.2021 will be reviewed based on a reassessment of the working capital cycle. These measures will be contingent on banks getting satisfied that the same is necessitated due to economic fallout from COVID-19.
✅ Will I be treated as defaulter?
No. Since the moratorium/deferment of loan, recalculation of the ‘drawing power’, or reassessing the working capital cycle are allowed by the bank to enable the borrower to tide over economic fallout due to COVID-19, these reliefs will not lead to the downgrading of asset classification of the borrower. Also, this will not qualify as a default and will not be reported to Credit Information Companies.
✅ How can I opt for a moratorium extension on my loan?
Customers of Kotak Mahindra Bank, who want to avail the relief for the New Moratorium Period (i.e., 01.06.2020 to 31.08.2020) on term loans under the RBI circular, can click on the below link and provide the relevant details.
The bank will be presenting the post-dated cheques (PDCs) or actioning ECS/NACH mandates, etc., provided by their customers, for collection according to the respective due dates from 01.06.2020. Customers who want to avail the relief for extended moratorium under the new RBI circular, must provide required details to the Bank (by clicking the above link) within 7 days (or a permitted by the bank) from their first due date falling on/after 01.06.2020. The requests will be considered by the bank on the merits of the case.
✅ Will the repayment term of my loan remain the same?
No. The repayment schedule of term loans (for which relief is approved by the bank) will be extended by up to another 3 months in addition to tenure change under phase 1 of the moratorium. The EMI amount will be appropriately re-calculated, including interest accrued during the moratorium period. The moratorium period will be applicable for the principal and/or interest amount for all or part of the New Moratorium Period.
✅ How can I avail the benefit of the extended moratorium for credit card dues?
Credit card customers willing to avail the said relief, must provide their relevant details to the Bank, within 7 days (or a date permitted by the bank) from their first due date falling after 01.06.2020. The request will be considered on the merit of the case. Click on the below link to provide the details.
✅ How can I avail deferment of interest for working capital facilities?
Customers who want to avail deferment of interest on working capital facilities can click on the below link and provide the relevant details on or before 10.06.2020 (or a date permitted by the bank).
In the case of CC/OD, including KCC Loans, the bank will consider the request for deferment of interest on the merits of the case affected by COVID 19.
✅ When will the deferred interest be payable?
In normal course, the deferred interest, need to be paid immediately after the end of the moratorium period (i.e., 011.09.2020). However, customers who want to covert the accrued interest into FITL, including for earlier relief period (01.03.2020 to 31.05.2020), should make a request to the bank. The bank will examine such requests on a case-to-case basis and the accrued interest will be converted into FITL at the discretion of the bank. Such FITL, wherever allowed, needs to be repaid as per the terms and conditions of the bank. However, the outer limit of repaying the FITL would be 31.03. 2021.
✅ Is there any reduction of margin?
For customers facing financial stress due to the economic fallout of COVID-19, the bank will consider a reduction of margin on stocks, receivables, other eligible securities, etc., for computation of Drawing Power (DP) for CC/OD limits and allow higher DP than earlier, depending on the impact on the borrower, based on their credit assessment. Such reduction of margin will be valid for all changes effected up to 31.08.2020 for such period not exceeding 31.03.2021 as per the impact assessment on working capital cycle. The margin will be reverted to the pre-relief margin after such period as stipulated by the bank.
✅ Who is eligible for a reduction of margin and reassessment of working capital cycle/limits?
All borrowers who are availing working capital facilities in the nature of:
- Bill discounting/ Letters of Credit/ Gold Metal Loans, etc.
Whose working capital requirement/ cycle has been impacted by the pandemic, resulting in:
- Cancellation/ deferment/ re-schedulement of orders
- Shutdown of workplace/unit
- Non-availability of manpower/ transportation for manufacturing/ sale of goods/ services
- Non-realization of debtors/ elongation of realization period
Will be eligible for relief under this provision. The bank will consider such relief under on merits of the case.
✅ What are the conditions for availing the policy?
The Bank will take into account:
- The stress on the borrowers due to the pandemic
- The borrower must not be under IBC proceedings
- The borrower shouldn’t have been classified as NPA or willful defaulter/ RFA/ Fraud by KMBL or other banks.
While the bank’s policy outlines the broad internal guidance that it will follow to take decisions with respect to the moratorium, it’s in the sole discretion of the bank to take decisions regarding this policy, depending on a case-to-case basis. The bank reserves the right to change the policy within the framework of RBI regulations.