Loan moratorium: Borrowers to pay simple interest for six months, Centre will repay additional interest, Check Full Details Here
The scheme is meant to bring "additional relief" to borrowers affected by the pandemic-induced financial distress.
NEW DELHI: In view of the unprecedented and extreme COVID-19 situation, the government announced a major relief for individuals and MSME borrowers by waiver of the compound interest on specified loans for six months period. The loans eligible under the scheme include MSME loans, education loans, housing loans, consumer durable loans, credit card dues, automobile loans, personal loans to professionals, consumption loans.
All lending institutions will credit the difference between compound interest and simple interest on loans in the respective accounts of eligible borrowers for the period between March 1 and August 31.
The Centre has informed the Supreme Court that the difference in the compound interest and simple interest charged for six months of moratorium period on eight categories of loans worth up to ₹2 crore will be paid back to borrowers by November 5, 2020.
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Here are a few important points to note:
- The borrowers will be eligible to receive the payment irrespective of whether the borrower had fully availed or partially availed or not availed of the moratorium on repayment announced by RBI on March 27 earlier this year, which was extended on May 23rd until August 31.
- Any borrower whose aggregate of all facilities with lending institutions is more than ₹2 crore (sanctioned limits or outstanding amount) will not be eligible for ex-gratia payment under this scheme. Also, the loan accounts should not be non-performing asset (NPA) as on the date mentioned above.
- The lending institution has to be either a banking company, or a public sector bank, co-operative bank or a regional rural bank, or All India Financial Institution, a non-banking financial institution, housing finance company or a micro finance institution.
- The lenders must credit the difference between compound interest and simple interest to the eligible borrowers by 5 November.
A borrower with a Rs 50 lakh home loan outstanding, for example, will get a benefit of around Rs 12,425 in the form of savings on accounts of compound interest for a six months period, assuming the rate of interest at 8 per cent. At this rate, six months simple interest cost comes roughly to Rs 2 lakh, and along with the compound interest it becomes Rs 2,12,425 — with the government paying the difference of Rs 12,425. All borrowers will have to pay simple interest to the banks. Exact waiver benefit will depend on the stage of the loan and outstanding principal amount.
SOURCE: NEWS AGENCIES