In a relief to borrowers at the start of the holiday season, the government announced Friday night an interest waiver on loans up to ₹2 million rupees regardless of whether or not the moratorium was applied.
On October 14, the Supreme Court ordered the Center to implement “as soon as possible” the interest exemption on loans of up to ₹2 million rupees under the RBI moratorium scheme in view of the COVID-19 pandemic that says the common man’s Diwali is in the hands of the government.
This will come in the form of granting the ex gratia payment of the difference between compound interest and simple interest for a period of six months from March 1 to August 31.
“The undersigned intends to convey that in view of the extreme and unprecedented situation of COVID-19, the central government has approved” Scheme for the granting of ex gratia payment of the difference between compound interest and simple interest for six months to borrowers on certain loan amounts (from March 1, 2020 to August 31, 2020). The benefits under the scheme would be sent through credit institutions, “the ministry said in an official order.
How will relief spread?
Relief will be extended through financial institutions such as banks, Non-Bank Finance Companies (NBFC), NCFC – Microfinance Institutions, National Agricultural and Rural Development Banks, Housing Finance Companies, National Housing Banks, etc.
This comes after the Supreme Court ordered the central government to implement the interest exemption on loans of up to ₹2 crore as soon as possible noting that it is not fair for the government to delay the implementation of its decision.
Eligibility Criteria for the Compound Interest Waiver Scheme
Segment borrowers (MSME loans, education loans, home loans, durable consumer loans, credit card fees, auto loans, personal loans to professionals, and consumer loans) that have loan accounts with sanctioned limits and an outstanding amount ₹2 crore as of February 29, 2020, will be eligible under the scheme.
“The interest rate would be the one in force on February 29, 2020, in case the interest rate has subsequently changed, it will not be computed for the purposes of this calculation. The amount payable ex-gratia must be credited to the borrower’s account for the respective credit institutions as ex gratia payment under the scheme, “the order said.
He said that the crediting exercise of the amount in the respective accounts of eligible borrowers by the respective credit institution will be completed on or before November 5.
“Once the exercise is completed, credit institutions can submit their claim for reimbursement no later than December 15, 2020. Claims will be submitted to designated officers / cell at State Bank of India. SBI is recommended adequately equip its designated officers / cell to process such claims in a timely manner and to report details of them on its website, “he added.
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 supreme court to go beyond the tax policy decisions already made, such as the exemption from compound interest charged on loans up to ₹Rs 2 crore for a six-month moratorium period may be “detrimental” to the general economic scenario, the national economy and banks may not have “unavoidable financial constraints”.
The Supreme Court is hearing a number of petitions that have raised issues related to the announced six-month loan moratorium 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.
* With agency contributions
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