Loan Moratorium Relief: No Interest On EMI Delay, Reward For Paying EMI (Govt Proposal)

We have covered in detail about every more in the banking sector, when it comes to the ‘loan moratorium’ issue.

Last month, we covered a story, as per which the Supreme Court had been receiving numerous petitions by borrowers to waiver the interest on their EMIs, accrued over the loan moratorium period, among other details.

Today, we would like to pick up from that story, considering this as follow-up.

In a recent finding, the Government has recently declared to provide relief to loan borrowers, by renouncing the interest on interest accumulated over the extension period of EMI moratorium, during the COVID-19 financial crisis.

In addition, the Government is also mulling the idea of providing a big relief to all those borrowers, who paid their EMI even during the pandemic.

Government Files an Affidavit in SC

In an attempt to provide relief to the ones facing trouble paying their EMIs on loans during the Covid-19 period, RBI announced a 3-month moratorium period for EMI payments on March 27, payable between March 1 and May 2020.

It was further extended for another 3 months on May 23 and borrowers could defer paying their EMIs until August 31.

There were anticipations of the RBI possibly extending the moratorium period by another 2 years.

However, recently the Government has filed an affidavit in the Supreme Court, which dictates a ‘relief’ package to loan borrowers.

This affidavit says that the interest on interest accrued during the extension period will be waived-off, along with one other addition.

The affidavit also mentions that the Government is also planning to provide relief to those borrowers who continued paying their EMI even during the economic crisis during the pandemic.

EMI Moratorium Benefits to These Sectors

The highlighted points of the EMI Moratorium affidavit submitted by the Government to the SC, contains a spectrum of sectors which shall avail these relaxation benefits.

This includes relaxation on compound interest, made available to these sectors:

• Small and Medium Enterprises (SMEs)
• Education
• Auto
• Consumer
• Business
• Education, and
• Borrowers who have taken personal loans worth up to Rs 2 crore.

Even those individuals who have delayed their credit card repayment due to the moratorium period, shall also be able to avail this relief package.

How Important is this Relief Package?

According to Harsh Roongta, Certified Financial Planner, 

“Any relief is a welcome relief and one should grab this with both hands. But, as far as those who continued to repay their loan during the lockdown, the government of India can provide relief as those loan borrowers who availed bank loan on time are paying EMI at higher interest rate.

If it can be fixed at current levels, then it will be a big reward for those loan borrowers who continued to repay their loan even during the lockdown.”

However, on Government’s part, the affidavit clearly mentions that for refunding the compound interest amount to loan borrowers, the central government will have to bear a burden of about Rs 6,000 to Rs 7,000 crore.