RBI guidelines on Moratorium 2.0 : Way to rescue economy from COVID19

Blog > RBI guidelines on Moratorium 2.0 : Way to rescue economy from COVID19

Given the extension of the lockdown and continuing disruptions on account of COVID-19, the RBI has extended the moratorium period by three months on 22 May 2020. Earlier the moratorium was ending on 31st May but now it is extended up to 31st August 2020.

This extension will provide relief to many individuals, especially the self-employed, as they would have found it difficult to service their loans such as car loans, home loans, etc. due to loss of income during the lockdown period from March 25, 2020.

The borrowers or customers can choose Opt-in and Opt-Out, for availing of the Moratorium facility in respect of the credit facilities taken.

What is OPT-IN?

All those customers or borrowers whose cashflow is impacted due to COVID 19 can go with Opt-in for the moratorium, under this, the customer or borrower can make payment delays of any of the outstanding term loans or credit cards dues which are arising between March 01 to August 31, 2020.

In case the customer is availing of the multiple credit facilities from the financial institutions, in that case, the moratorium option is being exercised on an individual basis for each of the credit facilities.

What is Opt-out?

All those customers or borrowers whose cash flow is not impacted due to COVID 19, then it is wise to pay off their monthly installments on time by choosing OPT-OUT from the moratorium. You need to click on the link shared by the bank either through SMS or E-mail. You can visit the bank’s website also and choose the option i.e. ‘Opt-in ‘or ‘Opt-out’.

As it is a must to understand that moratorium is not applicable on interest charges, it will keep on adding with your principal amount. In case you have a loan Rs 50, 000,00, tenure is 10 years and the interest rate is 8.5%. In case you postponed paying EMI from April 01, then interest will be applicable for a month is Rs 35000. In April end, the loan amount will be Rs 50, 35000. If you continue this for three months, the total interest amount will be Rs 100, 7000. It is indirectly increasing your loan amount.

So, it is recommendable if your cash flow is not much impacted, then continue paying your EMIs or credit card dues to avoid additional interest charges.

Please refer below frequently asked questions(FAQs) related to Moratorium:

What is Moratorium?

It is a temporary delay given to make payment of interest/ principal/ installments for March 01 to 31st August 2020. It is not a waiver. Interest is a must to be paid on all amounts which are postponed on pursuant of a moratorium. It will be added along with the principal amount that you need to pay during the end of the moratorium period.

Is the Moratorium applicable to principal/ interest /or both?

The moratorium can be offered on below payments which are due during the Moratorium period:

Is Moratorium compulsory or optional?

The moratorium is optional for all types of credit facilities such as retail loans, personal loans, credit card dues, business loans, and farmer loans.

If my loan disburses in April 2020, am I eligible for the moratorium period?

Yes, if your loan repayment due falls on or before 31st August 2020.

Is it OK if I continue in making EMI payment rather than opting for a moratorium?

Yes, please continue to pay your EMI

How will interest charge and recovered from retail loans such as home loans, personal loans, consumer durable loans, or two-wheeler loans?

The accrued interest will keep on adding with the principal amount due. It will increase the residual tenure of the loan except in cases where the extension of tenure is not possible, in those cases, the EMI amount will increase.

Who can give a moratorium option?

All commercial banks (including regional rural banks, small finance banks, and local area banks), co-operative banks, all -India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) (“lending institutions”) are being permitted to allow a moratorium of three months on payment of installments in respect of all term loans outstanding as on March 1, 2020.

Why was my account debited when the RBI has announced a moratorium?

Opting for the Moratorium is a choice of customer. It is also understood that all customers may not opt for the Moratorium given that there is an additional levy of interest payable under the terms of the Moratorium. If you wish to opt for the Moratorium, we would be happy to refund the EMI debited and register your Loan account under the Moratorium process.

What if I have already paid my EMIs and would like to avail the moratorium till 31st August 2020.

If you have already paid your EMIs and would like to avail the moratorium till 31st August 2020. You can avail of the moratorium benefits for the unpaid EMIs.

FAQs related to Credit Card

Do I need to pay credit card outstanding during the moratorium period?

Each time your billing cycle ends, the credit card bill is generated. If your cash flow is impacted during COVID 19, you may avail moratorium to make payment of your credit card bill till 31st August 2020. It is not a waiver just grace period given for the convenience of cardholders by the RBI. One needs to keep in mind that the interest charges on the credit card dues will be added along with your credit card bill amount according to the card variant under the applicable terms and conditions.

Will late payment charges be levied on the moratorium period?

If you opt for a moratorium on your credit card, then there will be no late payment charges.

For all the purchases made on the credit card during the moratorium period, will I be charged interest?

Any unpaid dues in moratorium will attract interest charges according to the standard interest rate of card variant as per applicable terms and conditions.

Will I able to change my statement cycle during the moratorium period?

Once you opt for a moratorium period, you will not be able to change your statement cycle.

Will my credit limit be changed during the moratorium period?

Yes, the credit limit can be modified i.e., restored or decreased as per the discretion of the bank during the moratorium period as per applicable terms and conditions.

How do I avail of the credit card moratorium?

To avail the credit card moratorium,(a) voluntarily defer paying the outstanding during this period i.e. make NIL payment(b) turn off AutoPay (in case the same is currently availed) through net banking / mobile banking to avail the benefit of the moratorium and reactivate the same post the end of the moratorium period.

FAQs related to credit score

Will taking the option of the moratorium do impact my credit score?

The moratorium on payments will not qualify as a ‘default’ for supervisory reporting of credit information companies by the banks. So, it will not have any negative impact on your credit scores. Any delay in payment of dues or outstanding amount after the expiry of a moratorium of customers or borrowers will qualify for reporting to credit bureaus by the banks.