Last Friday, the government announced the scheme for granting ex gratia payment of the difference between compound interest and simple interest for six months to borrowers on specified loan accounts.
The lending institutions have been asked to carry out the exercise of crediting the amount in the borrowers’ accounts before 5 November.
According to Frequently Asked Questions (FAQ) about the scheme, the relief should include the following segments -MSME loans, education loans, home loans, consumer durable loans, credit card fees, car loans, personal loans for professionals and consumer loans.
Lending accounts with sanctioned limits and outstanding not exceeding Rs 2 crore (total of all facilities with all lending institutions) and such accounts must be standard in the lending institutions’ books from the cut-off date of 29 February 2020, it said.
The period considered for repayment must be from 1 March to 21 August 2020, ie. a period of six months or 184 days.
The ex gratia relief is credited to the account of all eligible borrowers with no requirement to apply, it said.
Under the scheme, the lending institutions must credit the difference between compound interest and simple interest in respect of the eligible borrowers in the respective accounts during the said period, regardless of whether the borrower fully or partially exercised the moratorium on repayment of loans announced by RBI on March 27, 2020.
The scheme also applies to those who have not used the moratorium scheme and continued to repay loans.
The scheme, which was announced under the direction of the Supreme Court, is likely to cost the Treasury $ 6,500.