Interest on loans up to 2 crore for borrowers who have taken moratorium during the lockdown to be waived said the government on Friday. The details of the same were mentioned and it included that those borrowers who didn’t choose the same will be allowed an ex gratia cashback for it. Small business owners and individuals who have borrowed who satisfy the aforementioned condition can avail the payment.
All RBI- regulated lenders were informed about the government’s approval of the scheme of ex gratia payments by the Finance Ministry in a written statement. The payments will be granted for specified loan accounts between March 1 and August 31,2020. Banks, cooperative banks, housing finance companies and microfinance institutions are also included as lenders. The written statement also includes the government affidavit that it is willing to pay the difference between the simple and compound interest during the moratorium period.
In addition, those who paid on time will receive compensation even though they didn’t have to pay the compensation. It is estimated that the cost of waiver of interest on interest will be around 6500 crores.
In order that legal complications are avoided, the government has specifically mentioned that the compensatory payment does not constitute a legal, contractual or equitable liability of the central government.
According to calculations made by bankers, those who have paid EMI on home loans worth Rs. 1 crore are eligible for Rs. 16000 as ex gratia. This amount is made after considering that interest rate is 8%, half- yearly interest of Rs. 4,00,000 and compound interest of Rs. 16,269.
The amount would be credited by the respective bank to the customer’s bank account and they can claim it from the government later.
The benefit for those borrowers who have repaid in full would be calculated for the moratorium period when the loan remained outstanding and the interest rate of the loan agreement would be considered for calculation.
Banks would calculate the weighted average lending rate for those transactions EMI on basis for customers who have used credit cards.