Mumbai: In a recent development, the Finance Ministry has approved a scheme to provide relief to borrowers in compound interest for an extended six-month loan moratorium period in the wake of the COVID-19 pandemic.
It will come as a prepayment of the difference between compound interest and simple interest for a period of six months from March 1 to August 31.
“The undersigned is directed to state that in view of the unprecedented and extreme COVID-19 status, the Central Government has approved the prepayment of the difference between the compound interest and simple interest for six months to the borrowers in the specified period. Plan loan amount (from March 1, 2020, to August 31, 2020). The benefits under the scheme will be given through lending institutions,” the ministry said in an official order on Friday.
This relief will be given through financial institutions like banks, non-banking financial companies (NBFCs), NCFC – Micro Finance Institutions, National Bank for Agriculture and Rural Development, Housing Finance Companies, National Housing Bank, etc.
After the Supreme Court directed the Central Government to implement the interest waiver on loans up to Rs 2 crore at the earliest, it was seen that this was not a delay in the implementation of the government’s decision.
Borrowers in segments – MSME loans, education loans, housing loans, consumer durables, credit card dues, automobile loans, personal loans for professionals, and consumption loans – which have sanctioned limits and dues not exceeding Rs 2 crore. Will be eligible under the scheme on February 29, 2020.
“The rate of interest will prevail on February 29, 2020, if thereafter the rate of interest has changed, it will not be accepted for the purposes of this calculation. They will have to deposit the amount due to pre-wide. As per the order, concerned Payments are made as pre-payment to the borrower’s account by lending institutions,” it said.
It states that the exercise of depositing the amount in the respective accounts of the eligible borrowers by the concerned lending institution will be completed on or before 5 November.
“After the exercise is complete, the lending institutions can submit their claim for the latest reimbursement by December 15, 2020. Claims will be submitted to the designated officers / SAIL at the State Bank of India. SBI is advised to To properly equip its designated officers/cell. To process such claims on time and inform the same details on its website, “it added.