Banks have started crediting the difference between compound interest and simple interest in the account of borrowers for the specified loan accounts during the moratorium period.
Banks have started crediting the difference between compound interest and simple interest in the account of borrowers for the specified loan accounts during the moratorium period. "Dear customer credited COVID-19 Relief ex-gratia of ... On November 3 to your account," PTI quoting a message from a public sector bank to a customer said.
Waiver of interest on interest Scheme
Last week, the Reserve Bank of India had asked all lending institutions, including non-banking financial companies, to implement the waiver of interest on interest for loans up to Rs 2 crore for the six months moratorium period beginning March 1, 2020.
On October 23, the government had announced the scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months to borrowers in specified loan accounts. The scheme mandates ex-gratia payment to certain categories of borrowers by way of crediting the difference between simple interest and compound interest for the period between March 1, 2020 to August 31, 2020 by respective lending institutions.
The government had asked the lending institutions to complete the exercise of crediting the amount in the accounts of borrowers by November 5. Housing loans, education loans, credit card dues, auto loans, MSME loans, consumer durable loans and consumption loans are covered under the scheme.
What is the scheme?
As per the scheme, the lending institutions shall credit the difference between compound interest and simple interest with regard to the eligible borrowers in respective accounts for the said period irrespective of whether the borrower fully or partially availed the moratorium on repayment of loan announced by the RBI on March 27, 2020.
After crediting the said amount in the respective accounts of eligible borrowers, the lending institutions would claim reimbursement from the Central government through the nodal agency of State Bank of India as stipulated under the scheme, an affidavid by the Centre has said.
Who is eligible for a waiver of interest on interest scheme?
Issuing additional frequently asked questions (FAQs) on the scheme, the finance ministry on Wednesday said consumptions loans, including those backed by gold as collateral, are eligible for the waiver. This is the second additional FAQs released by the ministry and comes just a day ahead of the last date for implementing the scheme. However, loans against fixed deposits [including Foreign Currency Non-Resident (Bank) FCNR(B) account, bonds and other interest-bearing instruments], and shares etc., and loans given for investment in financial assets (including shares, debentures etc.) are not eligible for coverage under the scheme.
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