Banks have begun to repay the compound interest that was charged on specified loan accounts to borrowers. At the Reserve Bank of India’s (RBI) indication, all non-banking institutions and other lending institutions have ensured that the scheme of waiver of interest on the interest of loans of up to the amount of Rs 2 crore for the moratorium period is implemented by the 5th of November.
The Ministry of Finance clarified on Wednesday that people who have taken consumption loans along with that backed by gold as collateral will be made eligible to avail of the waiver. Independent of the nature of the guarantee, several individual loans from the eight categories of borrowers which include Micro, Small, and Medium Enterprises (MSME) by the lending institution will also be covered under the scheme. The details of the same have been made available in the second Frequently Asked Questions (FAQs) published by the ministry.
As per instructions laid down by the Supreme Court, last month, the government had revealed the scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months to borrowers in specified loan accounts.
Some loans that come under the aforementioned scheme include loans that cover housing, education, consumption, consumer durables, auto, MSME, and credit card dues. Although, agricultural loans and other allied activity loans were not included in the scheme. According to the scheme given, lending institutions will have to pay the ex-gratia payment for certain categories of borrowers for the time period between March 1 to August 31 of 2020. The amount to be paid will have to be calculated from the difference between simple interest and compound interest of the aforementioned time period.
It was when the COVID-19 pandemic first broke out in the nation that the Reserve Bank of India (RBI) announced the moratorium period of three months for repayment of EMIs and credit card dues which were later extended to the 31st of August. Furthermore, after the announcement of the Supreme Court to grant ex-gratia amount for the same period, non-financial institutions and other lending institutions have decided to make the payment for the time period from March 1st to August 31st.
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