The Reserve Bank of India (RBI) has directed all lending institutions to implement provisions of the scheme for grant of ex-gratia payment of the difference between compound and simple interest from March 1 to August 31 to borrowers in specified loan accounts and take necessary action within the stipulated time.
The Ministry of Finance had earlier approved a scheme to provide relief in interest compounding to borrowers for the six-month loan moratorium period extended in view of the COVID-19 pandemic.
"The undersigned is directed to convey that in view of the unprecedented and extreme COVID-19 situation, the Central government has approved Scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months to borrowers in specified loan amounts (March 1, 2020, to August 31, 2020). Benefits under the scheme would be routed through lending institutions," the Ministry said in an official order last week.
The relief will be extended through financial institutions like banks, non-banking financial companies (NBFCs), NCFC - Micro Finance Institutions, National Banks for Agriculture and Rural Development, housing finance companies, National Housing Banks, etc.
This comes after the Supreme Court directed the Central government to implement the interest waiver on loans of up to Rs 2 crore as soon as possible observing that it is not fair on the government's part to delay the implementation of its decision.
Borrowers in the segments -- MSME loans, education loans, housing loans, consumer durable loans, credit card dues, automobile loans, personal loans to professionals and consumption loans -- who have loan accounts having sanctioned limits and outstanding amount not exceeding Rs 2 crore as on February 29, 2020, will be eligible under the scheme.