The Finance Ministry on Wednesday approved guidelines for a scheme for grant of payment of the difference between compound interest and simple interest for six months of loans up to Rs 2 crore. After crediting the amount, the lending institutions will claim the reimbursement from the central government as part of the scheme. Last week, the Supreme Court had directed the Centre to implement the interest waiver on loans of up to Rs 2 crore under the Reserve Bank of India’s moratorium scheme “as soon as possible” in view of the COVID-19 pandemic.
According to operational guidelines issued by Department of Financial Services, 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.
Housing loan, education loans, credit card dues, auto loans, MSME loans, consumer durable loans and consumption loans are covered under the scheme.
According to the scheme, the lending institutions will 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 applicable on those who have not availed the moratorium scheme and continued with the repayment of loans.
According to sources, the government will have to shell out Rs 6,500 crore for the implementation of the scheme.
Hearing the matter on October 14, the Supreme Court observed that it was concerned about how the benefit of interest waiver would be given to borrowers and said the Centre has taken a “welcome decision” by taking note of plight of the common man, but authorities have not issued any order in this regard.
“Something concrete has to be done,” a bench headed by Justice Ashok Bhushan had said, adding, “Benefits of waivers to borrowers up to Rs 2 crore must be implemented as soon as possible.”
The top court, which posted the matter for hearing on November 2, told the advocates appearing for the Centre and banks that “Diwali is in your hand”.
The Centre recently told the top court that going any further than the fiscal policy decisions already taken, such as waiver of compound interest charged on loans of up to Rs 2 crore for six months moratorium period, may be “detrimental” to the overall economic scenario, the national economy and banks may not take “inevitable financial constraints”.
The top court is hearing a batch of petitions which have raised issues concerning the six-month loan moratorium period announced due to the COVID-19 pandemic.
The bench, also comprising Justices RS Reddy and MR Shah, said that when authorities have decided something then it has to be implemented.