The Economic Times
English EditionEnglish Editionहिन्दी
| E-Paper
Search
+

    Finance Ministry issues guidelines for implementation of interest waiver on loan

    Synopsis

    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.

    Agencies
    According to sources, the government will have to shell out Rs 6,500 crore for the implementation of the scheme.
    In a festival gift to borrowers, the Finance Ministry on Wednesday approved guidelines for a scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months of loans up to Rs 2 crore. The guidelines came after the Supreme Court 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.

    As per the operational guidelines issued by 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.

    "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.

    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 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.

    According to sources, the government will have to shell out Rs 6,500 crore for the implementation of the scheme.

    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.

    "Something concrete has to be done," a bench headed by Justice Ashok Bhushan had said, adding, "Benefits of waivers to borrowers up to Rs 2 crore must be implemented as soon as possible."

    The top court, which posted the matter for hearing on November 2, told the advocates appearing for the Centre and banks that "Diwali is in your hand".

    The Centre recently told the apex court that going any further than the fiscal policy decisions already taken, such as waiver of compound interest charged on loans of up to Rs 2 crore for six months moratorium period, may be "detrimental" to the overall economic scenario, the national economy and banks may not take "inevitable financial constraints".

    The top court is hearing a batch of petitions which have raised issues concerning the six-month loan moratorium period announced due to the COVID-19 pandemic.

    The bench, also comprising Justices R S Reddy and M R Shah, said when authorities have decided something then it has to be implemented.

    Lending institutions to give cashback after Government announces waiver of interest

    Autoplay
    1 of 6

    Waiver of interest

    According to a report by PTI, in a relief to borrowers at the onset of the festive season, the government on October 23 announced waiver of interest on interest for loans up to Rs 2 crore irrespective of whether moratorium was availed or not. 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.


    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Also Read

    44 Comments on this Story

    Hevin Patel23 days ago
    Bank has credited Rs. 100 as COVID relief. "Refund! Rs. 100 credited in Loan A/c & adjusted against overdue/ future EMI. Ref: Ex Gratia Scheme of Govt of India for Interest on Interest charged" Is it's fun of our hard times
    Orwill Sebastian34 days ago
    I transferred my homeloan to other bank yesterday. However ended up paying interest on moratorium during foreclosure. Will I get refund for interest charged?
    harisaran panda35 days ago
    Good decision for those who pay their emi on time despite adverse situation
    The Economic Times