In a relief for borrowers amid the holiday season, the government has announced an interest waiver on interest on loans until ₹2 million rupees regardless of whether or not the moratorium was applied. According to estimates, the measure is likely to cost the government ₹6,500 crore. According to the guidelines, borrowers can make use of the scheme on specific loan accounts, including credit card fees, during a period from March 1 to August 31, 2020.
Here are 10 things to know:
1) In accordance with the scheme, credit institutions will credit the difference between compound interest and simple interest with respect to eligible borrowers in the respective accounts during the six-month 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.
2) MSME loans, education loans, home loans, consumer durables loans, credit card installments, auto loans, personal loans, and consumer loans are covered by this scheme.
3) On credit card installments, the interest rate will be the weighted average loan rate (WALR) charged by the card issuer for transactions financed based on EMI from its customers during the period between 1 February March 2020 and August 31, 2020.
4) The calculation of the WALR on the credit card fees must be certified by the legal auditor of the card issuer.
5) Credit card issuers typically rely on a number of EMI-based financing types. Since there is no flat rate available, WALR will be used as the benchmark rate, the government said.
6) For credit card installments, as well as education loans, home loans, consumer durable loans, credit card installments, auto loans, personal loans, and consumer loans, the outstanding balance in the account at the end of February 29, 2020 will be the reference amount in which the interest will be calculated (both simple and compound).
7) For accounts closed during the 6-month period, the crediting period would be from March 1 and restricted to the closing date of said account.
8) When making the calculation, the repayments in the loan account during the period to be computed will be ignored.
9) Credit institutions after crediting the amount will claim reimbursement from the central government. A deadline has been set for them on Saturday, November 5, to waive interest payments.
10) Any borrower whose sum of all these loans with lenders exceeds Rs. 2 crore (sanctioned limits or outstanding amount) will not be eligible for ex gratia payment under this scheme. Accounts must be standard like February 29, which means they must not be Non-earning Assets (NPA).
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