Lockdown moratorium | Outstanding till February 29 qualify for interest relief

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The loan outstanding as of February 29 would be the reference amount for calculating the differential interest amount under the ‘scheme for grant of ex-gratia payment of difference between compound interest and simple interest’ according to the FAQs released by the Finance Ministry.

Also read: Govt waives interest on interest for loans up to ₹2 crore

The Reserve Bank on October 27 asked all lending institutions, including non-banking financial companies, to ensure that the scheme of waiver of interest on interest for loans up to ₹2 crore for the six-month moratorium period is implemented by November 5, as decided by the government.

Last Friday, the government had announced the scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts.

The lending institutions have been asked to complete the exercise of crediting the amount in the accounts of borrowers by November 5.

Also read: RBI asks lending institutions to implement waiver of interest on interest scheme

According to the Frequently Asked Questions (FAQs) on the scheme, the relief shall cover the following segments — MSME loans, education loans, housing loans, consumer durable loans, credit card dues, automobile loans, personal loans to professionals and consumption loans.

Loan accounts with sanctioned limits and outstanding not exceeding ₹2 crore (aggregate of all facilities with all the lending institutions) and such accounts should be standard in the books of the lending institutions as on cut-off date of February 29, 2020, it said.

The period reckoned for refund shall be from March 1 to August 21, 2020 that is six months period or 184 days, it said.

Editorial | Compound conundrum: On interest waiver

The ex-gratia relief will be credited to the account of all eligible borrowers without any requirement to apply, it said.

As per the scheme, the lending institutions shall credit the difference between compound interest and simple interest with regard to the eligible borrowers in respective accounts for the said period irrespective of whether the borrower fully or partially availed the moratorium on repayment of loan announced by the RBI on March 27, 2020.

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

The scheme is also applicable on those who have not availed the moratorium scheme and continued with the repayment of loans.

The scheme, which was announced as per the direction of the Supreme Court, is likely to cost the exchequer ₹6,500 crore.

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Printable version | Jan 19, 2021 9:07:11 AM |

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