Good News! Didn't miss out on EMIs during lockdown? Get cashback from bank

Representational image

NEW DELHI: In a major relief to borrowers amid a global pandemic, the Finance Ministry has issued the guidelines for implementing a waiver of 'interest on interest' for six months. The payments will be made to individual borrowers and small businesses with loans of up to Rs 2 crore.

According to reports, the government may have to take a hit of Rs 7,000 crore for the implementation of the scheme.

In the wake of coronavirus pandemic in the country, the Reserve Bank of India had in March announced a moratorium on repayment of EMIs and credit card dues for three months. The central bank later extended the moratorium period till August 31. 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.

The Supreme Court on October 14 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.

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".

Under this, the government will pay an amount equal to the difference between the cumulative interest, ie the interest on interest and the simple interest, during the deferment granted for six months on a loan up to Rs 2 crore.

The benefit will be extended for loans below Rs 2 crore availed across eight categories: Micro, small and medium enterprises (MSMEs) loans, Education loans, Housing loans, Consumer durables loans, Credit card dues, Auto loans, Personal and professional and Consumption loans.