Diwali gift: Govt waives interest on interest for loans up to Rs 2 cr

In a relief to borrowers at the onset of the festive season, the government on late Friday night announced waiver of interest on interest for loans up to Rs two crore irrespective of whether moratorium was availed or not.

The Department of Financial Services came out with operational guidelines in the backdrop of Supreme Court’s direction to implement the interest waiver scheme, which is likely to cost the exchequer Rs 6,500 crore.

The apex court on October 14 directed the Centre to implement “as soon as possible” the interest waiver on loans of up to Rs 2 crore under the RBI moratorium scheme in view of the COVID19 pandemic, saying the common man’s Diwali is in the government’s hands.

As per the guidelines, the scheme can be availed by borrowers in specified loan accounts for a period from March 1 to August 31, 2020. “Borrowers who have loan accounts having sanctioned limits and outstanding amount of not exceeding Rs 2 crore (aggregate of all facilities with lending institutions) as on February 29 shall be eligible for the scheme,” it said.

As per the eligibility criteria mentioned in the guidelines, the accounts should be standard as on February 29 which means that it should not be Non-Performing Asset (NPA). Housing loan, education loans, credit card dues, auto loans, MSME loans, consumer durable loans and consumption loans are covered under 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.

The scheme is also applicable on those who have not availed the moratorium scheme and continued with the repayment of loans. The lending institutions after crediting the amount will claim the reimbursement from the central government.

The top court is hearing a batch of petitions which have raised issues concerning the six-month loan moratorium period announced due to the COVID19 pandemic.