In a great relief to borrowers this holiday season, the Finance Ministry issued guidelines to implement an ‘interest on interest’ exemption for six months. “The Government of India has announced the Program for the granting of ex gratia payment of the difference between compound interest and simple interest for six months to borrowers in specific loan accounts (1.3.2020 to 08.31.2020) (on Program ‘) on October 23, 2020, which requires ex gratia payments to certain categories of borrowers by paying the difference between simple interest and compound interest for the period between March 1, 2020 and August 31, 2020 by the respective lending institutions, “the Reserve Bank of India set.
The benefit will be extended to loans below ₹Rs 2 crore available in eight categories: 1) Micro, Small and Medium Enterprise Loans (MSMEs), 2) Education Loans, 3) Housing Loans, 4) Consumer Durable Goods Loans, 5) Credit Card Fees credit, 6) Auto loans, 7) Personal and professional loans, 8) Consumer loans.
Any borrower who has kept their account in standard status and made timely payment before COVID-19 is eligible for this credit, said Anil Pinapala, CEO of Vivifi finace india private limited.
Interest Waiver Scheme: Key Rules Credit Card Users Should Know
1) In the case of credit card fees, the interest rate will be the weighted average loan rate (WALR) charged by the card issuer for transactions financed by EMI from its customers during March 1 to March 31 August, the ministry said.
2) Criminal interest and late payment penalties will not be counted as part of the contracted rate or WALR.
3) The lending institution must be a banking company, a public sector bank, a cooperative bank or a regional rural bank, or an All India financial institution, a non-bank financial institution, a home finance company or a microfinance institution. .
4) Lenders must credit the difference between compound interest and simple interest to eligible borrowers by November 5.
5) Ex gratia relief will be credited to all eligible borrowers without any application requirements.
Who will be eligible?
The plan will be valid for borrowers who availed themselves of the moratorium totally, partially or not at all, as mentioned in the circular. So those who have not opted for the moratorium scheme offered by the Reserve Bank of India will also get the benefit of the interest waiver scheme.
“When doing the calculation, the repayments in the loan account during the period to be counted will be ignored. This will make the lender’s approach uniform for all borrowers, regardless of whether or not they have fully or partially taken advantage of the moratorium … “, the government’s notice read.
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