Will RBI’s Moratorium Impact Your CIBIL Score?

The Reserve Bank Of India (RBI) moratorium announcement was a relief for all loan borrowers as per the RBI rules there will not be any dent caused to credit histories of these borrowers. The move came after the RBI announcement of a 3-month moratorium for servicing all the term loans as a measure to contain the economic fallout due to the lockdown. The moratorium will be provided for both the principal and the interest rate. Now, if you have already paid the EMI dues for the month of March, then you can avail this benefit for two months, i.e. April and May.

Now, before you apply for the moratorium, there are certain things that you should know. The RBI has clearly stated that interest rate on loans will continue to accrue on the outstanding portion of the loan during the moratorium period. This means, you will have to pay three EMIs and the interest compounded for three months. Again, the interest rate accumulated on the same amount of loan will be different for different people, depending on their loan maturity period.

Moratorium’s impact on CIBIL score

The 3 months moratorium period can be offered by all commercial banks, co-operative banks, all-India Financial Institutions, and NBFCs in India. A CIBIL score check is important as your score displays your creditworthiness and avail loans in the future with ease. After the RBI announcement, many people had concerns regarding the 3-months moratorium period that will affect their CIBIL score. Well the good news is the moratorium period will have no effect on your CIBIL score.

This rescheduling of loan repayments will not be treated as default when banks and non-banking finance companies report it to the credit bureaus. There will be no downgrading in the CIBIL score of individuals or companies who have any kind of retail loans under their names. Also, the borrowers’ credit history will remain untouched from this announcement during this period of three months.

The RBI has let the borrowers decide whether they wish to avail this option. This means, those who want to pay their housing loan, car loan, credit bill etc. on time, can stick to their repayments schedule. However, the automated payment services for loan repayment will be stalled for during this period. But keep in mind that this will not be considered as a waiver, and the interest amount will get accumulated to the existing amount.

Benefits of the three-month moratorium period

• If you have liquidity crunch due to the lockdown situation, you get an immediate relief
• The RBI circular has specifically stated that the bank cannot declare you as a defaulter if you fail to pay the EMIs between March and May.
• Non-payment will not affect your CIBIL score.
• Availing the moratorium will not change the existing terms and conditions of the loan.

Should you opt for the RBI moratorium?

• Salaried individual:

If you are a salaried individual and are not facing any liquidity crunch you can simply stick to your EMI repayment schedule. If you are facing pay cuts, then try to pay the essentials first that includes EMI payments. There is no need for letting the interest amount get accumulated. However, in case of delayed payment or if you are fearing layoffs, then first use your emergency fund, this is an emergency situation. Opting for the EMI moratorium is the last resort.

• Self-employed individual: 

Similarly, if you have sufficient funds in hand, there is no need to panic. Stick to your EMI schedule. Otherwise, use your emergency fund. Opt for the moratorium, only when you do not find any other way out.

The lockdown led to people being isolated in their homes so in order to make payments online With the help of digital payment apps anyone can easily make online payments of bills, and make loan EMI with ease. You can make payment right from the comfort of your home, with a click on your phones. Digital payments have made it easier for people to practise social distancing and carry out germ-free transactions of money.

Read more about Impact of Moratorium on Future Personal Loan EMIs

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