Govt. issues directions for Interest Waiver: Scheme for grant of ex-gratia payment [Read Letter]
Central govt approves scheme for grant of ex-gratia payment of the difference between compound interest & simple interest for six months to borrowers in specified loan accounts
Following the announcement of the lockdown, the government will waive compound interest on those who have taken loans between March 1, 2020 and August 31, 2020
If you had not skipped your EMI instalments during the lockdown, you could be eligible for cashback from your bank. The government on late Friday night announced waiver of interest on interest for loans up to Rs 2 crore irrespective of whether moratorium was availed or not. "In view of the unprecedented and extreme COVID-19 situation, the Central government has approved scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months to borrowers in specified loan amounts [March 1, 2020, to August 31, 2020]. Benefits under the scheme would be routed through lending institutions," the ministry said in official order. The Department of Financial Services came out with operational guidelines in the backdrop of the Supreme Court's direction to implement the interest waiver scheme, which is likely to cost the exchequer Rs 6,500 crore.
The apex court on October 14 had directed the Centre to implement "as soon as possible" interest waiver on loans of up to Rs 2 crore under the RBI moratorium scheme in view of the COVID-19 pandemic saying the common man's Diwali is in the government's hands.
As per the guidelines, the scheme can be availed by borrowers in specified loan accounts for a period from March 1 to August 31, 2020. "Borrowers who have loan accounts having sanctioned limits and outstanding amount of not exceeding Rs 2 crore (aggregate of all facilities with lending institutions) as on February 29 shall be eligible for the scheme," it said.
As per the eligibility criteria mentioned in the guidelines, the accounts should be standard as on February 29 which means that it should not be Non-Performing Asset (NPA). Housing loan, education loans, credit card dues, auto loans, MSME loans, consumer durable loans and consumption loans are covered under the scheme.
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.
The scheme is also applicable on those who have not availed the moratorium scheme and continued with the repayment of loans. The lending institutions after crediting the amount will claim the reimbursement from the central government. Hearing the matter on October 14, the Supreme Court observed that it was concerned about how the benefit of interest waiver would be given to borrowers and said the Centre has taken a "welcome decision" by taking note of plight of the common man, but authorities have not issued any order in this regard.