Interest on interest for loans up to Rs 2 cr waived

Tribune News Service

New Delhi, October 24

The Union Finance Ministry on Saturday issued operational guidelines for implementation of the interest waiver scheme for loans up to Rs 2 crore during the Covid-hit period of March 1 to August 31.

Lending institutions will credit the difference between compound interest and simple interest to the eligible borrowers for six months, irrespective of whether the moratorium on repayment of the loan has been fully or partially availed.

Institutions covered

All public and private banks, NBFCs, housing finance companies, co-operative banks, regional rural banks, National Housing Bank and All-India Financial Institutions

The lenders will have to claim the reimbursement from the government, but only after crediting the amount to borrowers’ accounts. The scheme was announced on directions of the Supreme Court, which posted the matter for hearing on November 2. A letter containing the operational guidelines was sent to all banks and NBFCs on Friday.

The government has taken the stand that this is an ex gratia gesture due to the unprecedented and extreme situation.

As per the scheme, the borrower’s accounts should not be in the non-performing asset (NPA) category as on February 29. Housing, education, auto, MSME and consumer durable loans and credit card dues are covered.

For accounts that were closed between March 1 and August 31, interest would be credited from March 1, 2020, till the date of closure of the account.

The government said the rate of interest would be as specified in the loan agreement. In case no interest was charged on EMI for a certain period on consumer durable loans, the interest would be applied at lenders’ base rate.

The ministry has told the lenders that for the purpose of reimbursement, the compound interest will be reckoned on a monthly basis.

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