SBI mixed up up pre-payment - Need advise on how to proceed

[vikas5432]

I have a loan with SBI. I am currently on pre-emi that is during this period only interest is charged.

Recently, i did a pre-payment and it went smoothly. After couple of days i realised that EMI is not deducted. Upon checking with customer care I found that SBI used some part of that pre-payment amount for EMI portion and remaining went for principal repayment. Ideally they should have deducted from my saving account like every month(It had enough balance).

On contacting, SBI mentioned that it was a technical glitch. They are ok to now deduct the EMI from my savings account and put that pre-payment completely for reversal(basically reversing the glitch).

However, as a customer i am still at a loss. Since my prepayment did not go fully towards principal repayment, i will need to pay additional interest for no fault of my own.

What are my options. Should i just let this go or may be contact RBI ?

 

[varkey]

This is a home loan I suppose?

I think there is a wrong notion about the amount going towards principal or interest etc. Any payment you make to a loan account, it basically reduces the outstanding amount, meaning principal goes down.

Now every month, the interest for the preceding 30 or so days is calculated based on the daily outstanding and debited from the loan account.
Secondly, if say the EMI is due on 10th of the month, any payments made couple of days preceding this due date is tagged as an EMI payment unless specifically instructed to be considered as a prepayment and EMI debit should continue. So the only difference here is, whether the EMI debit should happen or not considering the payment covering the EMI few days back.

Now the glitch is basically, the system considered the pre-payment as an EMI payment, so to avoid double payment it skipped the EMI payment.

You are not losing anything by this, you could simply make the EMI amount payment manually and the issue is sorted, you didn't really need to wait till the bank debits it either. The only loss in your case is the interest for the EMI amount for the number of days the EMI was not debited. Say the EMI is 30k, and EMI was debited 5 days later, so maybe Rs 35 or so (at 8.5% interest). But you got savings account interest for those 5 days, so maybe net loss is even lesser.

@vikas5432

 

[vikas5432]

This is a home loan I suppose?

I think there is a wrong notion about the amount going towards principal or interest etc. Any payment you make to a loan account, it basically reduces the outstanding amount, meaning principal goes down.

Now every month, the interest for the preceding 30 or so days is calculated based on the daily outstanding and debited from the loan account.
Secondly, if say the EMI is due on 10th of the month, any payments made couple of days preceding this due date is tagged as an EMI payment unless specifically instructed to be considered as a prepayment and EMI debit should continue. So the only difference here is, whether the EMI debit should happen or not considering the payment covering the EMI few days back.

Now the glitch is basically, the system considered the pre-payment as an EMI payment, so to avoid double payment it skipped the EMI payment.

You are not losing anything by this, you could simply make the EMI amount payment manually and the issue is sorted, you didn't really need to wait till the bank debits it either. The only loss in your case is the interest for the EMI amount for the number of days the EMI was not debited. Say the EMI is 30k, and EMI was debited 5 days later, so maybe Rs 35 or so (at 8.5% interest). But you got savings account interest for those 5 days, so maybe net loss is even lesser.

@vikas5432

Thanks . How did you calculate Rs 35 for 5 days ? Daily interest should be much higher with 30k EMI as per me.

 

[varkey]

Thanks . How did you calculate Rs 35 for 5 days ? Daily interest should be much higher with 30k EMI as per me.

30000 x 8.5% (annual interest) / 365 (daily interest) x 5 gives approx Rs 35.

Basically if this 30k was credited 5 days early, your outstanding would have dropped by 30k, 5 days earlier.