As a relief measure amid the lockdown, the Reserve Bank of India (RBI), in March 2020, announced its decision to provide a moratorium of three months on all outstanding retail loans, starting from the month of March itself. The RBI clearly stated that it was not a measure to waive off the outstanding loans but a mere extension of the loan tenure. The requisite interest charges on the outstanding loans would continue to accrue, the RBI said.
The country’s central bank also underlined that opting for the 3 month moratorium would not negatively impact any individual’s CIBIL score. This essentially meant that a moratorium on CIBIL score also was provided.
A moratorium can be defined as the period where any individual, who has earlier availed a loan, is not required to pay the installments. The key highlight of the moratorium, as announced by the central bank, is that the borrower’s loan repayment schedule as reflected in their CIBIL score will not be affected.
In a normal scenario, if you default on your repayments, it will adversely impact your CIBIL score. But the central bank’s directive provided a moratorium on CIBIL score, where the rescheduling will not be treated as default. The rationale behind the moratorium was to provide relief to individuals, whether salaried or self-employed, dealing with liquidity crises.
RBI provided this moratorium on the following repayments:
The central bank, in its circular, has clearly said that all lending institutions, including banks and NBFCs have to provide a moratorium on all types of retail loans, like personal loans, home loans, automobile loans etc. All term loan repayment demands by both banks and NBFCs are under the ambit of the moratorium. The RBI’s directive is applicable to the following types of lending institutions:
Understanding CIBIL score: Financial institutions check your creditworthiness on the basis of your CIBIL score. The Credit Information Bureau (India) Limited (CIBIL) provides the three digit score - ranging between 300 and 900 - to financial institutions on the basis of your credit history. The CIBIL score is of paramount importance in securing various types of loans, especially unsecured loans like a personal loan. A CIBIL score of 750 is considered good for availing a personal loan. Remember, with a good CIBIL score your loan can be easily approved at a comparatively better rate of interest.
To check CIBIL score, you can go to the official CIBIL website and create an account. Once you fill the requisite details, including your PAN details, you will receive an OTP. After completion of the verification process, you will receive your free credit report. You can see the details of your credit history along with a summary of your clean, negative and defaulted accounts. Once you check CIBIL score, you can take the requisite steps to improve your creditworthiness.
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Thus, availing the 3 month moratorium will not affect your CIBIL score. You must, however, remember to maintain a good CIBIL score by not defaulting on repayments, once the moratorium ends. To get a holistic picture of your financial well-being and credit worthiness, remember to keep a check on your CIBIL score from time to time.