Amidst the ongoing reports on the RBI loan moratorium, we informed you that the Supreme Court directed the government to implement the interest on interest waiver on loans worth upto Rs 2 crore, by November 2.
The finance ministry has come out with a new notification, highlighting that that all the eligible borrowers will be credited the interest on interest on outstanding loans during the 6 month moratorium period, on or before November 5.
The ministry has also announced that once the amounts are credited to all those eligible, the financial institutions can claim for reimbursement from the Central Government.
Interest on Interest Credited by Nov 5
The government had submitted an EMI Moratorium affidavit to the apex court earlier this month, as per which relief would be provided to borrowers who availed personal loans worth up to Rs 2 crore during the six month moratorium period from March to August.
The Government has now announced via a notification that all the suitable borrowers, who availed the loan moratorium fully or partially, along with the ones who paid their EMIs on time, shall be credited with the ‘interest on interest’ or compound interest amount, charged during the six-month loan moratorium period.
All the nationalised banks, financial institutions and lending institutions are directed by the government to credit the suitable borrowers’ accounts by November 5.
After doing so, the financial institution can file for reimbursement from the Central government, by December 15.
Eligible Sectors/Borrowers for ‘Compound Interest’ Credit
Under this scheme introduced by the government, the eligible borrowers being credited the compound interest between March 1, 2020 to August 31, 2020 are the following sectors and individuals.
- Small and Medium Enterprises (SMEs)
- 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, will avail this relief package.
In fact, those borrowers who did not avail the EMI deferment during the moratorium period, shall be able to avail the package too.
It is likely to cost the government Rs 6,500 crore.
This relief package will be beneficial to borrowers whose loan accounts were not NPAs as of February 29, 2020.