In light of the extreme and unprecedented situation of COVID-19, the government announced significant relief for borrowers and individual MSMEs by waiving compound interest on specific loans for a period of six months. Loans eligible under the scheme include MSME loans, education loans, home loans, consumer durables loans, credit card installments, auto loans, personal loans to professionals, and consumer loans. The Government announced a plan called “Plan for granting 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)”.
What does that mean? In simple words, borrowers must pay simple interest on their loan amount during the six-month period between March and August against compound interest. Borrowers who have paid their installments on time will receive a refund from the lenders equal to a sum of “compound interest paid – simple interest.”
Here are some important points to keep in mind:
Borrowers will be eligible to receive payment regardless of whether or not the borrower has made full or partial use of the moratorium on payment announced by RBI on March 27 earlier this year, which was extended from May 23 to May 31. of August.
Any borrower whose sum of all facilities with credit institutions is more than ₹2 crore (sanctioned limits or outstanding amount) will not be eligible for ex gratia payment under this scheme. Also, loan accounts should not be delinquent assets (NPA) as on the date mentioned above.
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 financial institution. microfinance.
Lenders must credit the difference between compound interest and simple interest to eligible borrowers by November 5.
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