The government has announced guidelines for the waiver of compound interest, which was payable by borrowers who had opted for moratorium on their loan equated monthly instalments (EMI) for a six-month period between March and August 2020.
This will waive the interest-on-interest burden for all retail and Micro, Small and Medium Enterprises (MSME) borrowers of up to Rs 2 crore, including those who didn’t opt for the repayment moratorium allowed by the Reserve Bank of India (RBI) in March.
Here’s all you need to know about the compound interest waiver scheme:
1. The scheme, according to the guidelines issued by the department of financial services, can be availed by borrowers in specified loan accounts for a period from March 1 to August 31, 2020.
2. “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.
3. Housing loan, education loans, credit card dues, auto loans, MSME loans, consumer durable loans and consumption loans are covered under the scheme.
4. The lending institutions should be either banking company, public sector bank, co-operative bank or regional rural bank, All India Financial Institution, Non-Banking Financial Company, Housing Finance Company.
5. Lending institutions, as per the scheme, shall credit the difference between compound interest and simple interest with regard to the eligible borrowers in respective accounts.
6. It will be for the said period irrespective of whether the borrower fully or partially availed the moratorium on repayment of loan announced by RBI on March 27, 2020.
7. The scheme is applicable to those who have not availed the moratorium scheme and continued with the repayment of loans.
8. The lending institutions will claim the reimbursement from the Centre after crediting the amount. The government will have to shell out Rs 6,500 crore for the implementation of the scheme, reports said.
9. The difference between the compound interest and simple interest, under the scheme, will be credited to the borrower’s loan account for the period between March 1 and August 31. The interest rate on which the computation would be worked out will be as on February 29, 2020.
10. The government has directed lenders to credit the amount to the eligible borrowers before November 5.
(With agency inputs)
