The Ministry of Finance has approved a scheme to provide relief in interest compounding to borrowers for the 6-month loan moratorium period extended in view of the Coronavirus pandemic.
This will come in form of the grant of ex-gratia payment of the difference between compound interest & simple interest for 6 months period from March 1 to Aug 31.
On Friday, in an official order the Ministry said that “The undersigned is directed to convey that in view of the unprecedented & extreme Covid-19 situation, the Central government has approved “Scheme for grant of ex-gratia payment of the difference between compound interest & simple interest for six months to borrowers in specified loan amounts (March 1, 2020, to Aug 31, 2020). Benefits under the scheme would be routed through lending institutions".
The relief will be extended through financial institutions like banks, non-banking financial companies (NBFCs), NCFC - Micro Finance Institutions, National Banks for Agriculture & Rural Development, housing finance companies, National Housing Banks, etc.
This comes after the Apex Court directed the Centre to implement the interest waiver on loans of up to Rs 2 crore as soon as possible observing that it isn't fair on the Govt’s part to delay the implementation of its decision.
Borrowers in the segments -- MSME loans, education loans, housing loans, consumer durable loans, credit card dues, automobile loans, personal loans to professionals & consumption loans -- who have loan accounts having sanctioned limits & outstanding amount not exceeding Rs 2 crore as on Feb 29, 2020, will be eligible under the scheme.
The order said that “The rate of interest would be as prevailing on Feb 29, 2020, in case the rate of interest has changed thereafter, it shall not be reckoned for the purposes of this computation. They payable ex-gratia amount shall have to be credited to the account of the borrower by the respective lending institutions as ex-gratia payment under the scheme".
It said that the exercise of crediting the amount in the respective accounts of the eligible borrowers by the respective lending institution shall be completed on or before Nov 5.
It added, “After the exercise has been completed, lending institutions can lodge their claim for reimbursement latest by December 15, 2020. Claims shall be submitted to designated officers/ cell at the State Bank of India. SBI is advised to appropriately equip its designated officers/cell for processing such claims in a timely manner & to notify details of the same on its website".
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