Impact of RBI moratorium extension on you

The Reserve Bank of India announced measures to further ease financial stress and improve debt management in response to the COVID-19 crisis. The earlier moratorium which was ending on 31st May 2020, has now been extended by three months, i.e. August 31, 2020.

The extension of the moratorium means all financial institutions are now permitted to allow a moratorium of six months on payments of installments of all term loans and credit card dues arising between 1st March 2020 and 31st August 2020

Please note that the moratorium does not apply to interest charges. If you have Rs 1,00,000 due as on 3rd March 2020 and you take advantage of the moratorium till 31st Aug 2020, the dues payable on 3rd Sept 2020 could be as high as Rs 1,30,000 (Rs 1,00,000 (due amount) + Rs 30,000 (interest amount and additional bank charges)).

The moratorium is short-term relief but can result in long-term stress and ballooning interest at 36-42% CAGR. CRED, therefore, urges those who can to continue paying the total due amount, or as much of it as possible, within the due date.

Please read the FAQs below to understand the moratorium well and its implications. FAQs:- What is the moratorium period for Credit Card dues? Given the circumstances of the global pandemic, RBI has allowed banks to push the 'Billed Credit Card dues' falling between 1st March 2020 to 31st August 2020. This is not an exemption from repaying the amount. The payment can only be "deferred" by 6 months as per RBI circulars. If you take advantage of the moratorium, your credit score may not be impacted by non-payment of credit card dues for 6 months till 31st August 2020, but interest fees will continue to be charged at current rates or as specified by your credit card issuing bank. For credit card dues, billing will be restored on 31st August 2020. To avoid late fees and interest charges from 31st August 2020, you will have to pay your total due amount. If you pay your minimum due, you will avoid late fees but will be levied interest charges on the outstanding amount. If I take this option, will interest charges be levied for the deferred period of payment? The RBI notification has clearly specified that interest will continue to be charged on the outstanding amount during the 6-month deferment period. What do I have to pay after 6 months? Opting for 6 months 'deferment' option allows you to delay the payment of your credit card dues till 31st August 2020. As per our understanding of the circular, you will be expected to pay your outstanding amounts and the interest charges on the due date after 31st August 2020 to avoid late fees and impact on credit score. Will taking this option impact my credit score? Exercising this option may not impact your credit score since the banks may not report it as a "default" to RBI recognized credit bureaus.