EMI Interest Cashback scheme: No benefit for these categories

The affidavit filed by the Centre, through the Ministry of Finance, brings relief to a large section of borrowers.

New Delhi: The Centre has informed the Supreme Court that lenders have been directed to credit in the accounts of eligible borrowers by November 5 the difference between compound interest and simple interest collected on loans of up to Rs 2 crore during the RBI's loan moratorium scheme.

In an affidavit filed in the apex court, the government has said that the ministry has issued a scheme as per which lending institutions would credit this amount in the accounts of borrowers for the 6-month loan moratorium period which was announced following the COVID-19 pandemic situation.

Under the scheme, all lending institutions (as defined under clause 3 of the scheme) shall credit the difference between compound interest and simple interest in the respective accounts of eligible borrowers for the period between March 1, 2020 to August 31, 2020 (6 months / 184 days), the affidavit said.

The affidavit said the amount shall be credited by lending institutions irrespective of whether such eligible borrowers have fully availed or partially availed or have not availed of the moratorium viz. Deferment in payment of instalments as per the circulars dated March 27, 2020 and May 23, 2020 issued by RBI.

After crediting the said amount in the respective accounts of eligible borrowers, the lending institutions would claim reimbursement from the Central government through the nodal agency of State Bank of India as stipulated under the scheme, it said.

The Department of Financial Services has issued a set of Frequently Asked Questions (FAQs) on the interest waiver scheme so that any sort of confusions can be avoided and a clear and transparent message to borrowers can be relayed.

Types of loans covered and not covered in 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.

Loans for consumption purposes (for example social ceremonies, etc.) are also eligible for coverage under the scheme, besides other specified categories of loans like consumer durables, automobiles, education, credit card dues, housing and personal loans to professionals. 

However, loans against fixed deposits [including Foreign Currency Non-Resident (Bank) FCNR(B) account, bonds and other interest bearing instruments], and shares etc., and loans given for investment in financial assets (including shares, debentures etc.) are not eligible for coverage under the scheme.