Govt. issues directions for Interest Waiver: Scheme for grant of ex-gratia payment [Read Letter]
Central
govt approves scheme for grant of ex-gratia payment of the difference
between compound interest & simple interest for six months to
borrowers in specified loan accounts
Following the
announcement of the lockdown, the government will waive compound
interest on those who have taken loans between March 1, 2020 and August
31, 2020.
If
you had not skipped your EMI instalments during the lockdown, you could
be eligible for cashback from your bank. The government on late Friday
night announced waiver of interest on interest for loans up to Rs 2
crore irrespective of whether moratorium was availed or not. "In view of
the unprecedented and extreme COVID-19 situation, the Central
government has approved scheme for grant of ex-gratia payment of the
difference between compound interest and simple interest for six months
to borrowers in specified loan amounts [March 1, 2020, to August 31,
2020]. Benefits under the scheme would be routed through lending
institutions," the ministry said in official order. The Department of
Financial Services came out with operational guidelines in the backdrop
of the Supreme Court's direction to implement the interest waiver
scheme, which is likely to cost the exchequer Rs 6,500 crore.
The
apex court on October 14 had directed the Centre to implement "as soon
as possible" interest waiver on loans of up to Rs 2 crore under the RBI
moratorium scheme in view of the COVID-19 pandemic saying the common
man's Diwali is in the government's hands.
As per the
guidelines, the scheme can be availed by borrowers in specified loan
accounts for a period from March 1 to August 31, 2020. "Borrowers who
have loan accounts having sanctioned limits and outstanding amount of
not exceeding Rs 2 crore (aggregate of all facilities with lending
institutions) as on February 29 shall be eligible for the scheme," it
said.
As per the eligibility criteria mentioned in the
guidelines, the accounts should be standard as on February 29 which
means that it should not be Non-Performing Asset (NPA). Housing loan,
education loans, credit card dues, auto loans, MSME loans, consumer
durable loans and consumption loans are covered under the scheme.
As
per the scheme, the lending institutions shall credit the difference
between compound interest and simple interest with regard to the
eligible borrowers in respective accounts for the said period
irrespective of whether the borrower fully or partially availed the
moratorium on repayment of loan announced by the RBI on March 27, 2020.
The
scheme is also applicable on those who have not availed the moratorium
scheme and continued with the repayment of loans. The lending
institutions after crediting the amount will claim the reimbursement
from the central government. Hearing the matter on October 14, the
Supreme Court observed that it was concerned about how the benefit of
interest waiver would be given to borrowers and said the Centre has
taken a "welcome decision" by taking note of plight of the common man,
but authorities have not issued any order in this regard.
"Something
concrete has to be done," a bench headed by Justice Ashok Bhushan had
said, adding, "Benefits of waivers to borrowers up to Rs 2 crore must be
implemented as soon as possible." The top court, which posted the
matter for hearing on November 2, told the advocates appearing for the
Centre and banks that "Diwali is in your hand". The Centre recently told
the apex court that going any further than the fiscal policy decisions
already taken, such as waiver of compound interest charged on loans of
up to Rs 2 crore for six months moratorium period, may be "detrimental"
to the overall economic scenario, the national economy and banks may not
take "inevitable financial constraints".
The top court is
hearing a batch of petitions which have raised issues concerning the
six-month loan moratorium period announced due to the COVID-19 pandemic.
The bench, also comprising Justices R.S. Reddy and M.R. Shah, said when
authorities have decided something then it has to be implemented.
Central
govt approves scheme for grant of ex-gratia payment of difference
between compound interest & simple interest for six months to
borrowers in specified loan accounts (1.3.2020 to 31.8.2020). Benefits
to be routed through lending institutions, as per eligibility criteria.
The
central government has taken a big step to get the market back on track
due to the Corona epidemic and lockdown. The Modi government issued a
circular on Saturday
"Those who have taken loans of up to Rs 2 crore
from national banks or other financial institutions like NBFCs," he
said. Their lockdown time i.e. total compound interest of 6 months will
be waived.
This means that after the announcement of the
lockdown, between March 1, 2020 and August 31, 2020, the government will
waive the compound interest on those who have taken out a loan. That
is, if a customer feels compounded interest instead of normal interest
due to non-payment of the loan, the government will reimburse him.
The
Reserve Bank had earlier asked banks to pay interest rates. So that
they can avoid the burden of paying interest during the time of the
epidemic, now this decision of the central government has become a big
relief for small and medium enterprises and individual loan takers. What
is a government announcement?
The government said in a circular that all banks
would now pay the gap between compound interest and normal interest charged to debtors.
I.e.
those who have paid compound interest by the banks during the lockdown.
They will get their distance back. So those who have not paid interest
during the moratorium will have to pay only modest interest.