Q&A library

What is the company strategy to understand which customers are in need of loan to reduce financial stress and what are the best offers to customers who are having immediate credit needs?
Questioned by JATIN SAINI, Delhi
As lockdowns and other social curbs curtails customer physical interaction with their bank, at such times, it is critical for banks to prioritize the welfare of their customers. For those in debt or facing delinquency on their borrowing, it is the lender’s responsibility to provide short-term relief from debt payments for those in need while making payments as simple and frictionless as possible for those who can afford them. Lenders should activate programs for deferring payments, interest relief, and automated restructuring plans while also communicating details of organizations offering consumer guidance and debt relief. Lenders should rapidly modify their credit strategy, both to manage exposure and ensure the effectiveness of providing support and solutions to customers in delinquency. Many lenders are already undertaking active portfolio and balance-sheet management, selling underperforming assets, and reducing their portfolio-risk exposure. A few public banks have come out with some immediate relief packages for its customers. The Indian Bank has announced 5 emergency loans are for their corporate clients, MSMEs, SHGs, Retail borrowers & Pensioners. These loans are tailor made and suffice the customers immediate credit needs. They are namely IND- COVID Emergency Credit Line (IBCECL) for Corporate, IND- MSE COVID Emergency Loan— (INDMSE-CEL) for MSME, SHG-COVID - SAHAYA LOAN for Self Help Groups, IND-COVID Emergency Salary Loan for Retail borrowers, IND COVID- Emergency Pension Loan for Pensioners.Sourced from Economic Times articles dated 25 March 2020 and 26 March 2020.

Instead of paying a fixed EMI which is reasonably high for me during COVID-19, may I opt for STEP UP EMI where I can pay lower EMI during the time of COVID and later on, the EMI increases gradually as the tenure progresses?
Questioned by JENY JOHNY, Kerala
If you feel the STEP UP EMI is more suitable for you during this time than opting for a moratorium, you may check with your financial services provider for the same.

I am running a small business. During the time of COVID-19, I am undergoing a financial crisis. If I need to choose between 2 options, which would be a wiser one?: a) ‘Discontinue the running SIP & repay the EMIs without opting for moratorium’ OR b) ‘avail loan moratorium & continue to invest in SIP’?
Questioned by JENY JOHNY, Kerala
The decision to accept moratorium is to be made very carefully. Even though the interest rate will not change; the period for which interest will be charged will be increased. For e.g., if a moratorium of 3 months is availed, then interest will have to be paid for those 3 months too, in addition to the normal loan period (interest rate remains constant though). So, if your loan period is 9 months and you avail 3 months moratorium, then you will have to pay interest for 12 months in total. Thus, you should only avail moratorium if and only if you cannot under any circumstance make interest payment. If you can afford to pay interest regularly, then you should not opt for moratorium.

If a customer takes moratorium and he does not want the moratorium for the next month, is there is any option to cancel the moratorium.
Questioned by T V RAMESH, Andhra Pradesh
If you are financially distressed due to COVID-19 situation, a moratorium gives you the choice to defer your loan repayments. It's simply a deferral on the payment of your Equated Monthly Instalment (EMI). Your credit score will not be impacted during the period for which you take the moratorium. Once you have opted-in for the moratorium, you cannot cancel it in the next month. The moratorium will apply for 3 months / 2 months / 1 month basis what you have mentioned in the consent form. Your decision to opt-out from the moratorium cannot be reversed once applied . RBI moratorium is being provided specifically to enable those customers who may be in temporary difficulties for repaying their EMIs. It's not for those customers who can continue to pay their EMIs. Hence it is advised to avail this moratorium only if you are genuinely affected by the COVID crisis and facing financial difficulties. Also paying your EMIs on time improves your credit score and maximises your chances of getting another loan, when you need it the most. Sourced from FAQs section of DMI finance

Will the retail financing/banking sector be affected by the current Economic sector ?
Questioned by Dinesh, Kerala
Retail financing in India is an old and a common concept, including various options such as - housing loans, personal loans, consumer durable loans, education loans, credit cards loans etc. With the cash flow in the economy being unpredictable on account of COVID-19 scenario, there might be certain shifts/fluctuations in the interest rates of these types of loans. However, the products per se will not be affected much; the only changes that can be made will be in the interest rates. For a detailed guide on "retail financing" refer to - https://www.rbi.org.in/scripts/bs_viewbulletin.aspx?id=6698.

How to educate elder people on using safe online payments as the fraud activities are increasing
Questioned by Subhendu behera, Odisha
The importance of e-payment is increasing owing to the current scenario irrespective of the age. The sudden surge in digital payments has also increased the risk of cyber frauds. An article published on The Economics Times describes about the safety steps that we need to ensure while doing online payments. Search the internet carefully as poisoned search results are created by cyber criminals who use search engine optimisation trick to insert malicious links. It is better to keep a computer solely for financial transactions. Install Google Chrome with HTTPS enforcement and also have a trusted anti-virus programme. Also keep a password manager to avoid the common mistake of keeping one password for all your accounts. Never do financial transactions on a public Wi-Fi. Do not to save the bank and personal details in a browser or a payment site. And remember to log out every time you log in. The Hindu quoted a workshop organised recently by a Mumbai-based ‘Nana Nani’ Foundation to teach senior citizens to adopt e-payment. Such workshops can educate them about online transactions. It will be great if someone can guide and monitor the elders in the initial transactions they do.

How work from home is relevant in terms of efficiency and overall profitability?
Questioned by SOURAV BANERJEE, West Bengal
After being forced to shift to work from home (WFH) model during Covid-19 pandemic, a big debate has opened up in companies regarding cost efficiency and productivity in the long run after employees and managements found it delivered mixed results. Every service industry can actually build a whole methodology to determine the processes, proportion and type of work that can be done to analyse and increase the efficiency of the employees. George Inasu, Chief Operating Officer, Fidelity National Financial India says the employee cost under WFM and work from office is similar at around Rs 12,000 per seat. While the company’s cost of transportation and food is saved in WFH, the incentives needed to ensure better productivity and engagement has spiked by 140% during the lockdown. According to Knight Frank’s survey of 232 occupiers across the country, 28% have seen productivity improvement in the last 8 weeks of WFH, but in 61% cases it has either declined or remained same. However, the profitability factors vary from industry to industry.

Will the loans get more affordable in the coming days?
Questioned by SOURAV BANERJEE, West Bengal
The interest rates of the loans are fixed by the banks completely upon the repo rate, Repo rate is the interest at which RBI lends money to commercial banks in the country. Every time this rate reduces, it means that other banks can now borrow money from RBI at a much lower interest rate. However, this will come into effect only if banks decide to pass on the benefit to their customers. It’s completely banks discretion to decide upon the interest rates.An analysis done by trading economics, it’s said that The Reserve Bank of India unexpectedly lowered its benchmark repurchase rate by 40 basis points to 4 percent in an emergency move on May 22nd, amid an ongoing nationwide lockdown to prevent further spreading of the coronavirus. The reverse repo rate was also lowered by 40 basis points to 3.35 percent and the marginal standing facility rate to 4.25 percent. The committee also decided to continue with the accommodative stance of monetary policy aiming to achieve the medium-term inflation target of 4 percent +/- 2 percent, and mitigate the impact of COVID-19 on the economy, while supporting growth.

With Covid-19's effect varying from geography to geography and the frequent shutdowns, how can businesses come up with a long term or even medium term vision to plan their business activities and tide over the difficult situation ?
Questioned by RENJINI JYOTHISH, Kerala
Companies have to ideally plan out products and services - at a medium term level and then at a long term level. Targets have to be set, taking into account the goals that a company wants to achieve on a short, medium and finally at a long term basis. The key would be to identify the demand for goods and services, as the needs of the customer and the market has changed on account of the pandemic; thus, our goods and services need to be tailored accordingly and the same will apply for our plans too.

How to improve business in Covid-19 lockdown.?
Questioned by Amol Wakide, Maharashtra
It has become challenging for most businesses to keep their financial wheels spinning during the lockdown period due to less revenue churn and the uncertainty in the global financial environment. The new norms of social distancing and nationwide lockdown have impacted our day to day business badly. It’s time to revamp our business strategies and plans and relook at how we can manage and operate. The need to assess on the fixed and variable expenses and analyse the actual expenses is utmost important, It’s also important to understand and analyse the business model, some serious reconsiderations would be required if the effect of the pandemic continues for few months or beyond. Businesses will need to strategize, communicate, and act with compassion and would require a revision of sales revenue goals and product timelines along with a new operating plan. In that case, entrepreneurs and leaders will have to keep the communication transparent as much as possible with their customers, vendors and most importantly to employees.

#RestartIndia Response Network
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