NEW DELHI: After being pulled up by the Supreme Court, the Government last week finally announced a waiver of compound interest for those who opted for the six-month moratorium extended by the Reserve Bank of India. But, will you be eligible to take advantage of the interest waiver?
According to guidelines issued by the government, if you had opted for either the full moratorium or partial moratorium, you will get back the interest-on-interest portion paid by you. The guidelines suggest that retail loans such as home, education, auto, personal, and credit card debt of up to Rs 2 crore availed between March 1, 2020, and August 31, 2020, are eligible for this relief.
To be eligible to avail the waiver, the loan account should be a standard account and not a non-performing asset (NPA) as on February 29, 2020, which means you cannot have defaulted on your monthly installments.
In the wake of the lockdown, the central bank had announced a moratorium on the repayment of loans for a period of three months and later extended the same for three months till August 31. A petition was filed in the SC that all interest on all loans should be waived off during the moratorium period owing to extreme hardship faced by the people during the lockdown.
The Centre has informed the Supreme Court that the difference in the compound interest and simple interest charged for six months of moratorium will be paid back to borrowers by November 5, 2020. The lender needs to deposit the interest in their bank accounts.
The relief will be extended through financial institutions like banks, non-banking financial companies (NBFCs), Micro Finance Institutions, National Banks for Agriculture and Rural Development, housing finance companies, National Housing Banks, which are guided by the RBI.
After crediting the amount into the customer’s account, banks can claim it from the government. If the borrower has fully repaid the loan in between, the benefit would be calculated for the moratorium period when the amount was outstanding. The cost of this scheme for the government is expected to be in the Rs 5,500-6,000 crore range.