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What is RBI’s 3 Month Moratorium Period?

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Highlights

  • Have a look at the Detailed Explanation of RBI’s 3 Months Moratorium Period.
  • Go through the Advantages of this RBI’s Leverage.

In the latest monetary policy meet held on March 24-27 2020, the RBI has decided to give a 3-month moratorium period for all outstanding loans as on March 1, 2020. Remember, this is not an EMI WAIVER. The move is in line with the economic pressures induced by the Coronavirus outbreak. So, this could mean some savings for you on your loan and help you deal with the likely situation of less or no income. Your credit score will not reduce if you don't pay the EMI. But doing so can raise your interest liability as banks would like to cover their losses, which is likely to be the case on deferred EMI payments, by increasing the interest component of the EMI after the moratorium period gets over. So, if you have the money, keep paying to reduce your interest liability. The moratorium, which was ending on May 31, 2020, has been extended till August 31, 2020.

The Coronavirus Outbreak has become a major concern worldwide including India. India is also facing financial issues after lockdown and so the citizens of India. Therefore, the Reserve Bank of India has issued certain guidelines that will help to remove the financial burden from the individuals. In the Guidelines RBI says that an individual having any type of loan or debt on himself can delay the payment of EMIs for 3 months and it will not affect the CIBIL Score of the individual. This guideline is known as the RBI 3 Months Moratorium Period. In a lawful term, Moratorium means a legal authority is given to the debtors to postpone the repayment of the debt. Even the bank is not eligible to charge any extra fees on the delayed payments. The credit card bills are also covered under this guideline.

Advantage of 3 Months Moratorium Period

Removes Financial Burden:- The main reason to provide the Moratorium Period is to lower down the financial burden of the individual that is happening due to lockdowns and Coronavirus. Once you skip the repayment of debt for 3 months, you will have enough funds to fulfill other basic necessities.

No Affect on the CIBIL Score:- Usually if you skip the EMI payment or Credit card bill payment then it has a negative impact on your Cibil Score. But if you skip the EMI payment and Credit Card bill payment during the 3 Months Moratorium Period then it will not affect your Cibil Score. This facility is given to the debtors for a period of 3 months only.

No Extra Fees will be Imposed:- There are some banks that charge late payment fees if you forget to pay the EMI or credit card bill. But during the period of 3 months of moratorium if you skip the payment, then the bank will not charge any extra fees for the late payment if you make payment even after 3 months.

The Reason why 3 Months Moratorium Period is Not Good For the Individual

The 3 Month Suspension is given to fight the financial crisis but this facility has an adverse effect on the individuals. There is no guidelines related to the Interest chargeable on the outstanding EMI or Credit Card bill amount and that means that 3 months leverage will make you pay an extra amount of interest with the credit card bill and EMI after 3 months. Therefore, it is better to clear the debts on the due date if you have enough funds otherwise you will have to pay an extra amount of interest later. So the 3 Months Moratorium might prove a disadvantage for you.

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Take Away

Now you have got your answer that is the meaning of the 3 MonthMoratorium period given by RBI and it totally depends on you whether to usethis leverage or not. It will help you to fight the financial crisis but on theother hand, the 3-month suspension will make you pay an extra amount ofinterest on the outstanding bill amount. The ball is in your court and you haveto decide whether to use this facility or avoid it.

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