RBI Extends Moratorium on Loans & Credit Card Dues to 31st August-Five Things to Know

If you make a fresh purchase during moratorium period, the interest will start accruing immediately. At the end of it, you will end up with a hefty payment in the way of interest on your outstanding bill

In a major relief to borrowers, the Reserve Bank of India (RBI) on Friday extended the moratorium period for the repayment of loans and credit card dues by another three months till August to help them beat any income disruption being caused due to the Covid-19 crisis.

In March, the central bank had allowed a three-month moratorium on repayment of all term loans due between March 1, 2020 and May 31, 2020.

"In view of the extension of the lockdown and continuing disruptions on account of COVID-19, it has been decided to permit lending institutions to extend the moratorium on term loan instalments by another three months, i.e., from June 1 to August 31, 2020," RBI Governor Shaktikanta Das said on Friday.

Das's statement also applies to credit card dues. Here are five things that you need to know if you are a credit card user.

1) If you opt for the moratorium on your credit card bill, you will not be required to pay anything for the six-month period, not even the minimum due amount, and the bank won’t charge any late payment fees. However, banks will continue to levy interest as usual on the outstanding amount. In addition to this, if you make a fresh purchase during this period, the interest will start accruing immediately. At the end of it, you will end up with a hefty payment in the way of interest on your outstanding bill, so it might not be a good idea to opt for the moratorium for your credit card.

2) Interest rate on your credit card bill can be quite steep, and rolling over the bill for even a few months can end in an unnecessary outgo for you. So keep checking your credit card bill as you normally would, and pay off any outstanding amount, if you can.

3) "Delaying credit card bill payments will only bump up your liabilities, as the card will keep on accumulating monthly interest at the rate of 3-4% on the outstanding dues, as well as on fresh purchases," says Raj Khosla, Founder and managing director, MyMoneyMantra.

4) Some credit card issuers have started blocking cards of customers who have availed of the moratorium on outstanding repayment. Blocking the credit cards temporarily of such people can be a part of banks’ strategy to contain the risk of increased NPAs after the moratorium period. Opting for moratorium means the customer has cash flow problems.

5) The only apparent benefit of opting for moratorium is that it doesn't affect one's credit scores but apart from that, the devil really lies in the details of this newfangled facility.