In a relief for borrowers at the start of the holiday season, the government announced on Friday night the waiver of interest on interest for loans of up to Rs 2 million regardless of whether the moratorium was applied or not.
The Department of Financial Services issued operational guidance in the context of the Supreme Court’s direction to implement the interest exemption scheme, which is likely to cost the Treasury 6.5 billion rupees.
On October 14, the high court ordered the Center to implement “as soon as possible” the exemption of interest on loans of up to 2 million rupees under the RBI moratorium scheme in view of the COVID-19 pandemic, saying that the The common man’s Diwali is in the hands of the government. .
According to the guidelines, borrowers can use the scheme on specific loan accounts during a period from March 1 to August 31, 2020.
“Borrowers who have loan accounts that have sanctioned limits and an outstanding amount not to exceed Rs 2 crore (sum of all facilities with credit institutions) on February 29 will be eligible for the scheme,” he said.
According to the eligibility criteria mentioned in the guidelines, accounts must be standard as of February 29, which means they must not be non-earning assets (NPA).
Home loans, education loans, credit card fees, auto loans, MSMEs, durable consumer loans, and consumer loans are covered by the plan.
Under the scheme, credit institutions will credit the difference between compound interest and simple interest with respect to eligible borrowers in the respective accounts for said period, regardless of whether the borrower made full or partial use of the moratorium on repayment of the loan. announced by the RBI. on March 27, 2020.
The scheme is also applicable to those who did not take advantage of the moratorium scheme and continued with the repayment of loans.
Credit institutions after crediting the amount will claim reimbursement from the central government.
Hearing the matter on October 14, the Supreme Court noted that it was concerned about how the benefit of the interest exemption would be awarded to borrowers and said that the Center had made a “welcome decision” in noting the plight of the man. common, but the authorities have not issued any order on the matter.
“Something concrete must be done,” said a bank headed by Judge Ashok Bhushan, adding: “The benefits of exemptions for borrowers of up to 2 million rupees should be implemented as soon as possible.”
The high court, which released the matter for hearing on Nov. 2, told advocates for the Center and the banks that “Diwali is in your hands.”
The Center recently told the high court that going beyond tax policy decisions already made, such as waiving compound interest charged on loans of up to Rs 2 crore during a six-month moratorium period, can be “detrimental”. for the general economic scenario. , the national economy and banks cannot assume “unavoidable financial constraints”.
The high court is hearing a series of petitions that have raised issues related to the announced six-month loan default period due to the COVID-19 pandemic.
The bank, which also includes Judges RS Reddy and MR Shah, said that when authorities have decided something, it should be implemented.
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