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Centre’s Diwali gift: Guidelines for interest waiver on loans up to Rs2 cr


The Centre on Friday approved a scheme to grant ex-gratia payment of the difference between compound interest and simple interest for six months for loans up to Rs2 crore.

A statement from the finance ministry said that the ex gratia payment under the scheme shall be admissible irrespective of whether the borrower had fully availed or partially availed or not availed of the moratorium on repayment announced by RBI March 27, 2020. This was later extended to May 23.

The operational guidelines issued by the Finance Ministry said that borrowers who have loan accounts with sanctioned limits and outstanding amount not exceeding Rs2 crore (aggregate of all such loans with all such lending institutions) as on February 29 will be eligible for the scheme.

The scheme will cost the government an additional Rs 6,500 crore.

On March 27, the Reserve Bank of India (RBI) had announced a three-month moratorium on term loans from March 1 to help borrowers with the economic fallout of COVID-19 and the resultant lockdown.

The aim was to provide more time to borrowers to clear payments of EMIs without their loans being classified as non-performing assets (NPAs).

What Supreme Court had said about loans

 The Supreme Court had on October 14 said benefits of waivers for borrowers up to Rs 2 crore must be implemented as soon as possible. 

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The Apex Court had said the Centre had taken a ‘welcome decision’ by taking note of the plight of the common man but pointed out that the officials had not issued any order in this regard.

Highlights of the scheme

  • It will be applicable on MSME, education, housing, consumer durables, automobile, personal, professional, consumption loans and credit card dues.
  • It is not applicable for borrowers who have more than a combined total loan of Rs2 crore from all lending institutions
  • The loans should not have been declared as a non-performing asset NPA as on February 29, 2020.
  • The six months will be calculated from March 1, 2020, to August 31, 2020.
  • If loans are closed during the said period, the scheme will be restricted to the date of closure from March 1.
  •  The rate of interest considered will be the one prevailing on February 29, 2020.
  • The amount should be credited before November 5, 2020.
  • The lending institutes need to first credit the amount and then lodge reimbursement claims by December 15, 2020.
  • A grievance redressal mechanism should be put in place for the eligible borrowers by banks and lending institutions.
  • SBI will process the claims submitted by banks and other lending institutions.


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