Payment Moratorium In View of Covid-19 Pandemic
In view of COVID-19 pandemic, RBI has issued a notification on rescheduling of payments (permitted to grant a moratorium) for 3 months to term loans and working capital loans. This moratorium applies for three months for the instalments falling due between 1st March 2020 to 31st May 2020. The repayment schedule for such loans as also the residual tenor, will be shifted across the board by three months after the moratorium period. However, Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period.
Let us examine with an example:
If a borrower avails of any of the above-mentioned credit facilities for a period 5 years, assuming already paid some instalments, he can opt to defer for 3 months that is his last payment due shall be 63rd month instead of 60th month. Similarly, credit cards minimum due will be treated as zero for these months.
The other side of the coin here is, one must pay hefty interest as high as 48% per annum in case of credit cards. In case of the loans, the loan tenor may get extended as much as 1 to 6 extra EMIs during the period. Obviously, which is an addition cost in opting moratorium. Opting moratorium is no good idea, unless the financial position is too tight to take care of EMIs. So, one must exercise this option carefully keeping in view of additional cost incurred in future vis a vis not opting for the same. However, borrower to approach respective institution seeking moratorium option. It is also noted that some of the credit card issuers have given this option to all card holders without card holders’ request.