Finance ministry directs lenders to implement interest waiver on loans

The ex-gratia benefit will be routed through lending institutions, the Finance ministry said in a notification directed to banks and other lending institutions on Saturday.

Hyderabad: The Ministry of Finance has issued guidelines for a scheme for grant of ex-gratia payment of difference between compound and simple interest to borrowers of specified loan accounts up to Rs 2 crore from the period March 1 to August 31, 2020.

The ex-gratia benefit will be routed through lending institutions, the Finance ministry said in a notification directed to banks and other lending institutions on Saturday.

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As per the circular issued by the Department of Financial Services, lenders have to credit the amount to the account of the borrower on or before 5 November, providing relief to borrowers. Thereafter, the lending institutions will have to claim reimbursement from the Central government by 15 December.

The benefit will cover loans availed by micro, small and medium enterprises (MSMEs), housing, education loans, consumer durables, credit card dues, auto loans, personal, professional loans and consumption loans.

The outstanding amount cannot exceed Rs 2 crore, as on February 29, 2020. The loan should not be a non-performing asset/bad loan to be eligible under the scheme as on 29 February. Borrowers whose aggregate of all facilities with lending institutions is over Rs 2 crore (sanctioned limits or outstanding amount) are not eligible for ex-gratia payment under this scheme.

As per the scheme, the lenders shall credit the difference between compound interest and simple interest with regard to the eligible borrowers in respective accounts whether the borrower fully or partially availed the moratorium announced by the RBI on March 27, 2020. The scheme is also applicable to those borrowers who have not availed the moratorium scheme and continued with the repayment of loans.

The lender has to be either a banking company, a public sector bank, urban co-operative bank, State co-operative, district central co-operative bank, regional rural bank, or All India Financial Institutions (AIFIs), a non-banking financial companies (NBFCs), housing finance company or a micro finance institution.

The guidelines come after the Supreme Court directed the Centre to waive the interest on loans at the earliest under the RBI moratorium scheme in view of the Covid-19 pandemic.

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