RBI moratorium not a relief, pay EMIs and credit card dues if you can

The three-month moratorium allowed by the Reserve Bank of India on EMI repayments seemed to be a relief for those who had been demanding a deferment due to the lockdown. But in reality, that’s not the case.

Moratorium provides no relief to your EMIs and credit card’s outstanding payments cycle. For example, if you have to pay Rs 100,000 as an EMI for a home loan or credit card bill on April 5 and you chose not to pay. Then you will be charged an applicable monthly interest rate.

In case, you don’t pay the EMI in May as well,  you will be charged interest on the principal plus interest amount for April. Clearly, the RBI’s announcement on deferment of such payments for the next three months means nothing. 

If you choose not to pay your EMIs and credit card minimum outstanding balance between 1st March 2020 to 31st May 2020 and pay the accumulated interest before the given deadline, then you won’t be treated as a defaulter. Another upside from this moratorium is that non-payments of the aforementioned payments won’t impact your credit score.

According to industry estimates, credit card companies charge a compound annual interest rate of anywhere between 36% to 42%.

Moreover, credit card interest gets charged an additional 18% GST.

The impact of the credit card non-payment was also highlighted by Kunal Shah, founder and CEO of Cred, who asked credit card users to try to pay full amount due as there is no escape from the interest during this period.

Commenting on the matter, Nithin Kamath, CEO of Zerodha, has also suggested clearing credit card dues as soon as possible as banks will continue to charge the usual interest rate.

On Friday, RBI had allowed all commercial banks (including non-banking financial companies or NBFCs -housing finance companies and micro-finance institutions) and lending institutions to defer EMI repayment and interest on working capital repayments by three months.