{"id":9578,"date":"2020-10-28T20:50:19","date_gmt":"2020-10-28T15:20:19","guid":{"rendered":"https:\/\/www.mintyapp.in\/blog\/?p=9082"},"modified":"2021-06-28T14:31:16","modified_gmt":"2021-06-28T09:01:16","slug":"government-issues-guidelines-for-interest-waiver-on-loan","status":"publish","type":"post","link":"https:\/\/blog.fintoo.in\/blog\/government-issues-guidelines-for-interest-waiver-on-loan\/","title":{"rendered":"Government issues guidelines for interest waiver on loan"},"content":{"rendered":"\n

The Government of India recently announced the interest waiver on loans up to 2 crores. This was done to provide relief to the borrowers who have the liability to repay loans amid COVID<\/a>-19. Global Pandemic had resulted in a nationwide lockdown and thus we experienced disruption in businesses. This further led to job loss and sizeable pay cuts to most employees. With limited cash in hand, it was difficult for most of us whether a businessman or an employee to continue paying EMIs. <\/p>\n\n\n\n

To bring in\nsome ease for the borrowers, Government had earlier introduced moratorium of\nEMIs on loans for a period of 6 months i.e. from March 2020 to August 2020.\nThis gave loan borrowers an opportunity to not pay EMIs for few months in\nanticipation of regular cash flow in coming months. <\/p>\n\n\n\n

Although it\ngave a relief of not paying EMI without affecting the CIBIL score. However,\nthis move was not much of use as people opting for loan moratorium had to pay\ninterest on that amount later on. <\/p>\n\n\n\n

Related Article: RBI\u2019s 3 month EMI Moratorium : 360 degree view<\/a><\/p>\n\n\n\n

Hence, Finance ministry has now approved guidelines for a scheme for grant of exgratia payment announcing the waiver of interest during this moratorium period on your outstanding loans. The important point to note here is that the entire interest is not waived off. <\/p>\n\n\n\n

A bank will charge simple interest instead of compound interest from the borrowers for the 6 month duration from March,2020 to August,2020. So people who have not opted for loan moratorium and paid the entire EMIs on time will receive a refund of difference in interest.<\/p>\n\n\n\n

In other\nwords, we can say that people will get refund of amount equal to difference\nbetween compound interest and simple interest.<\/p>\n\n\n\n

The lending\ninstitutions after crediting the amount will claim the reimbursement from the\ncentral government. It is estimated that the government will have to shell out\n\u20b96,500 crores for the implementation of this scheme.<\/p>\n\n\n\n

Although it seems like a Diwali gift to many, but it is not something to celebrate. The scheme is just aimed at refunding the compound interest on loans that accumulated during the six-month moratorium period.<\/p>\n\n\n\n

We will see\nthis in detail later on in this blog.<\/p>\n\n\n\n

But let us first understand who are all eligible for this waiver benefit?<\/p>\n\n\n\n

Eligibility<\/strong><\/h4>\n\n\n\n
  1. This benefit is available for all borrowers who whether availed of the moratorium or not availed. Hence, it is good news for those who paid regular EMIs and also for those who opted for moratorium benefits whether fully or partially during those 6 months.<\/li>
  2. The maximum aggregate loan outstanding should be not more than Rs.2 Crores. The eligibility limit of Rs. 2 crores as borrowed sum has to be an aggregate loan taken from the banking system. <\/li>
  3. The loan should not be under NPA (Non-Performing Assets) with the bank as of 29th February 2020.<\/li>
  4. The loan should be active as of 29th February 2020.<\/li>
  5. Lenders may be private banks, public sector banks, co-operative banks or regional, rural banks, all India Financial Institutions, NBFCs or Housing Finance Company.<\/li>
  6. This benefit is also available for those who closed the loan during the moratorium period.<\/li>
  7. Even partly-disbursed loans will be covered under this scheme.<\/li><\/ol>\n\n\n\n

    Types of\nLoan for which this benefit is available<\/strong><\/h4>\n\n\n\n

    Following\nare the types of loans eligible for interest waiver scheme:<\/p>\n\n\n\n