SBI Card dues restructuring plan: Should you apply for it?

SBI Card is now offering a restructuring option to customers who opted for the moratorium. The company decided on the resolution framework based on the RBI guidelines issued on August 6, 2020. This restructuring policy is applicable to accounts where the repayment capability has been temporarily impaired due to COVID-19 related stress. This policy framework is valid till December 31, 2020 for eligible accounts.

According to a PTI report, due to the moratorium, a number of customers had not been paying for the first three months and the company treated them as standard accounts, which was the same in line with the rest of the industry.

“After the first moratorium ended, we made it a customer-led enrolment in the second moratorium. However, a lot of customers did not enrol despite this,” says Ashwini Kumar Tewari, SBI Cards and Payment Services, Managing Director & CEO.

“Therefore, we had a large chunk of customers who came out of the moratorium. A lot of them paid up, but many of them did not pay also,” says Tewari, and adds that these payers fell into the category of delinquent customers.

So, with these delinquent customers, SBI Card is now working to enrol them either into the RBI restructuring scheme or own repayment plans so that they get more time and better interest rate to repay their dues.

In the first quarter ended June 30, 2020, SBI Card had Rs 7,083 crore under moratorium, which has now come down to Rs 1,500 crore, partly due to the fact that a large chunk has been repaid.

What are the eligibility criteria to apply for the restructuring of my dues?

The eligibility criteria for retail card holders are as follows: the account should have been enrolled for moratorium between March 1, 2020 and August 31, 2020; the account should not have been classified as a non-performing asset (NPA) in the preceding 12 months from March 1, 2020; the account shouldn’t be in default for more than 30 days as on March 1, 2020 and it should be standard on the day of appealing for restructuring.

The eligibility is defined at an individual account level and not at a customer level. So, in case you have multiple accounts (cards) from the bank and if only one of the accounts meets the above eligibility criteria, then only that account shall be offered the benefits of the restructuring framework.

What is proposed in the restructuring plan to eligible card holders?

The plan is the conversion of the existing outstanding balance into a term loan (restructuring) for a period of up to 24 months. The interest rate applied for restructured accounts are in the range of 13 per cent to 19 per cent a year based on the stage of delinquency and the tenure (between three and 24 months) to repay.

The restructuring request must be raised with the bank not later than December 31, 2020 and it has to be implemented within 90 days from the date of invocation. The date of invocation will be the date on which you and the company have agreed to proceed with the plan. Your consent will be obtained for the restructuring plan.

What do I need to provide for implementing the restructuring plan as finalised?

After your consent to the restructuring plan, you need to provide SBI Card an auto debit or National Automated Clearing House (NACH) instructions form or submit post-dated cheque for the deduction of the equated monthly instalments (EMIs) as per the agreed restructuring plan within the timeline as communicated.

Will the restructuring plan become void under specific circumstances?

Yes, the restructuring plan approved by the company would stand automatically withdrawn with immediate effect if any default occurs. These specific events of defaults are non-payment of the instalments during the restructuring program and failure to follow specific terms of the agreed payment schedule.

Will my credit card remain active after accepting the restructuring plan?

No, the credit facility extended on the credit card will be deactivated after accepting the restructuring plan. It will be reactivated after 3-6 months on the basis on regular EMI payments as per the restructuring plan.

Will the restructuring of my dues impact my credit report?

On restructuring your credit account, it will be reported as ‘restructured’ on the credit report. Going ahead, any default in payments as per the agreed restructuring plan will be reported to the credit scoring agencies and can have an adverse impact on your credit score.

Should I apply for restructuring of my dues considering the terms and conditions?

Taking into consideration the above terms and conditions, you should avoid applying for restructuring of your credit card dues. Suppose you opt for the restructuring plan with the company, it will be added debt for a period of up to two years. The restructured account will also have additional interest cost.

Instead, financial advisors suggest reviewing your investment portfolio carefully and getting rid of dud investments as the first step in case of a financial crunch. “Too many traditional insurance policies that you don’t need and consistently underperforming mutual funds when combined will make a tidy portion to repay or reduce the credit card dues,” says Sapna Tiwari, Co-founder and COO, Rupeewiz Investment Advisors.

(With inputs from PTI)

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