Govt Will Reward If You Paid EMIs & Didn’t Opt For Loan Moratorium; Cashback, Interest Waiver?

The government has waived off the interest on the loan moratorium bringing a huge relief to the borrowers. In other words, they are spared from paying “interest on interest”.

Now for the borrowers who did not opt for the moratorium, the finance ministry is looking into options for providing compensation like cashback. 

Read on to know more…

Benefits In Store For Borrowers Who Didn’t Avail Loan Moratorium!

This move by the government is to ensure fair play for borrowers who did not opt for a moratorium against those who opted for it. 

The borrowers who didn’t opt for a moratorium and still paid their dues includes 

1. Individuals
2. MSMEs with a debt of up to 2 crores 

A government source said, “It is possible to work out the notional value of benefit that a borrower would have received if he had opted for the moratorium. The government can pass this on to those who paid their dues. It will be unfair to ignore those who have been paying their dues despite hardship.”

However, this extensive exercise will be detailed out once the Supreme Court accepts the proposal for waiving off the “interest on interest”.

A point to be noted is that the Supreme Court has time and again asked the Centre to waive off this interest on loan moratorium but the Govt maintained charging interest. 

What Will Be The Cost of Relief for the Govt?

Anil Gupta, vice-president at rating agency ICRA, said, “Assuming not more than 30-40% of the overall loans of banks and NBFCs will be eligible for relief, the cost to the government should not exceed Rs 5,000-7,000 crore. This is assuming all borrowers are given relief irrespective of whether they availed the moratorium.”

Furthermore, he said that the relief will be provided to the borrowers who paid their dues on time by reducing a notional amount of “interest on interest” on the outstanding principal amount.

What Is The Obstacle?

Now, there are some borrowers who did not avail of the six-month moratorium whereas there are some who availed for a limited period of time.

A source said, “… the government does not have all the numbers at the moment, especially from all NBFCs and housing finance companies.”

As for the bankers, the process will be free of discretion and the benefits will be implemented after making necessary changes in the software.

IDBI Bank deputy MD Samuel Joesph Jebaraj said, “In case where the repayment is in equated monthly installment (EMI), banks may have to build an application to implement the relief. The effect of the moratorium was an extension of the tenure (keeping the same EMI) or higher EMI (keeping same tenure). Their interest on interest relief will be reflected in the reduced number of installments or slightly lower EMI for the same tenure.”

As you can see the computing of the number of people, their loan moratorium period, the bank’s concerns regarding software is a complex task. 

It will be interesting to see how the government is providing benefits to the borrowers

We will keep you updated.