The Ministry of Finance has approved a scheme to provide relief in interest compounding to borrowers for the six-month loan moratorium period extended in view of the COVID-19 pandemic.
This will come in form of the grant of ex-gratia payment of the difference between compound interest and simple interest for six months period from March 1 to August 31.
"The undersigned is directed to convey that 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 an official order on Friday.
The relief will be extended through financial institutions like banks, non-banking financial companies (NBFCs), NCFC - Micro Finance Institutions, National Banks for Agriculture and Rural Development, housing finance companies, National Housing Banks, etc.
This comes after the Supreme Court directed the Central government to implement the interest waiver on loans of up to Rs 2 crore as soon as possible observing that it is not fair on the government'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 and consumption loans -- who have loan accounts having sanctioned limits and outstanding amount not exceeding Rs 2 crore as on February 29, 2020, will be eligible under the scheme.
"The rate of interest would be as prevailing on February 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," the order said.
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 November 5.
"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 and to notify details of the same on its website," it added.
