Industry

‘Interest-on-interest waiver to cost exchequer ₹7,500 crore’

Soft sop: The gains equal the difference between compound and simple interests for 6 months ended Aug. 31 .   | Photo Credit: Getty Images/iStockphoto

More than 40% of system credit and 75% of borrowers stand to benefit from interest-on-interest concession announced by the government, an analysis by Crisil Ratings showed.

It indicated that the ex-gratia payment of interest-on-interest by banks and non-banking financial companies for the moratorium period (between March 1 and August 31) would amount to ₹7,500 crore of benefit for eligible borrowers. Lenders will not be impacted as the Centre had agreed to pick up the tab.

The benefit will be extended to borrowers with outstanding loans (standard as on February 29, 2020) of less than ₹2 crore under select categories, irrespective of whether the moratorium was availed of or not.

Such loans account for more than 40% of systemic credit and 75% of borrowers, Crisil said. The cost to the exchequer would have halved if the waiver were allowed only for cases where moratorium was availed of, it added.

The government has asked lenders to credit the amount to eligible borrowers by November 05, 2020.

The amount will be the difference between compound interest and simple interest over six months (March 1 to August 31).

Borrowers who had availed of higher-yielding loans would benefit more than others.

Consequently, borrowers of unsecured, micro and gold loans will benefit more than those who had taken home loans.

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Printable version | Dec 3, 2020 4:54:34 PM | https://www.thehindu.com/business/Industry/interest-on-interest-waiver-to-cost-exchequer-7500-crore/article32947363.ece

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