The unprecedented outbreak of COVID-19 has brought a great deal of worry over finances and investment across the globe. According to RBI’s notice (dated May 23, 2020), a moratorium period of 3-months was announced for all loan bearers and holders of credit cards. Though the previous moratorium period was till May 31, it was further extended from three more months, i.e. June 1 to 31 August 2020.
What is a Moratorium Period?
Moratorium period is like a repayment holiday where the loan or credit borrowers get an off time from repayments. Since the Reserve Bank of India has extended this period for another three months, you can defer payment of your dues without worrying about a late fee or cash crunch. It covers all types of loan such as agriculture loan, personal, home or car loans. According to the guidelines issued, moratorium period is also applicable to holders of credit cards. Besides, it also states that your CIBIL or credit score will not be affected by your deferred payments during this period.
Highlights of RBI Moratorium Guidelines
- All commercial banks can extend the moratorium, including rural banks, co-operative banks, small finance and local area banks, and NBFCs.
- Individual banks can frame a policy as per the suitability of their customer. Besides, banks can decide to whom they want to extend this facility.
- Payment deferment will not have any effects on your CIBIL score
- The Moratorium enables suspension of both the principal amount and related interest rate between March 1 to August 31
- Credit cards and all types of loans are covered – agricultural loan, home loan, car loan, educational loan, personal loan, and every other loan having fixed tenure
- EMI of loans for specific items are such as fridges, TVs, and mobile phones are also covered under this facility
- The Moratorium also extends to all working capital loans availed by businesses of all kinds
Although the guidelines are clear enough for an individual to understand, there are some points which holders of credit cards must remember. It will help you make the best decision for opting for a moratorium or not.
Things to Remember in Case of Credit Cards
- 6-Months Extension
If you opt for a moratorium for credit cards, you will not have to pay any dues, which includes the minimum due amount, interest levied on the dues or the total due credit amount. Also, the banks won’t be able to charge any late fee after you have opted for the facility for a period of 6-months. However, you must note here that the banks can levy interest on the outstanding balance of your credit cards.
- Pay Off Debts If You Can
Banks may not accept everyone’s moratorium application as it is subject to various parameters. They also have the power to choose their customers to whom banks can extend this facility. One of the reasons for not lending moratorium to all holders of credit cards is the fear of NPA, since opting for this facility indicates that the customer is possibly facing a cash crunch. Also, interest is levied on the outstanding amount that may increase your debt. Therefore, you should pay off your outstanding dues of credit cards to not hassle later.
- Keep a Check on Your CIBIL Score
RBI guidelines suggest that moratorium will not have any effect on CIBIL score of a person. You must keep an eye on your CIBIL score to maintain uniformity or for further improvement. If you see it dangling, try paying the outstanding dues to correct or increase it.
What Should You Do?
Guidelines from the Central Bank states that moratorium will only defer the payment of outstanding dues of your credit cards; it does not offer any concession or waiver of your pending dues. This is particularly useful for individuals who have irregular income during COVID-19 crisis. However, you should continue payment of at least the minimum due amount if you have a regular salary or opted for the moratorium.
Many people who do not have either loan or credit cards are also facing an issue with regards to cash flow due to irregular salaries. If you are also amongst those people, you can consider taking credit cards from reputable banks like Axis bank to solve your current financial issues. They provide one of the best credit cards that are also accompanied by various offers in the form of reward points. Redeem them to make the best use of your credit cards.
Credit cards during this time of pandemic can help you manage your finances in a much better way.