The Finance Ministry has come forward in aid to the bank borrowers. The government, on late Friday night, has announced a waiver of interest on interest for loans up to Rs 2 crore irrespective that moratorium was availed or not.
The ministry said in the official order, “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.”
1. According to the guidelines issued by the department of financial services, the scheme can be availed by borrowers in specified loan accounts for a period from March 1 to August 31, 2020, irrespective that the borrower availed the moratorium fully or partially or not at all.
2. “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.
3. Housing loans, education loans, credit card dues, auto loans, MSME loans, consumer durable loans, and consumer loans are covered under the scheme.
4. Lending institutions shall credit the difference between compound interest and simple interest with regard to the eligible borrowers in respective accounts.
5. The difference between the compound interest and simple interest, under the scheme, will be credited to the borrower’s loan account for the period between March 1 and August 31. The interest rate on which the computation would be worked out will be as of February 29, 2020.
6. The government has directed lenders to credit the amount to the eligible borrowers before November 5.
7. The lending institution has to be either a banking company, or a public sector bank, co-operative bank or a regional rural bank, or All India Financial Institution, a non-banking financial institution, housing finance company, or a microfinance institution.
8. In the case of credit card dues, the interest rate will be the weighted average lending rate (WALR) charged by the card issuer for transactions financed on an EMI basis from its customers from 1 March-31 August, it said. Penal interest and penalty for late payment will not be reckoned as part of the contracted rate or WALR.
The government will have to shell out Rs 6,500 crore for the implementation of the scheme, reports said.