The Union government on Friday issued guidelines for implementing a waiver of interest on loans of up to Rs 2 crore. Borrowers who took moratorium during the coronavirus-induced lockdown as well as those who didn’t opt for it will get an ex-gratia payment or a cashback. 

The Reserve Bank of India (RBI) in March announced a moratorium on repayment for three months. It later extended the moratorium period till 31 August.

The Centre has now approved to bear the difference between compound and simple interest on loans during the moratorium period.

Simple interest will be calculated on a daily basis at the rate as on 29 February 2020. Compound interest will be calculated on monthly basis. The difference of the two will be credited to the borrower. 

Lenders

Lenders include banks, cooperative banks, housing finance companies and microfinance institutions. 

State Bank of India (SBI) will be the nodal agency and will receive funds from the government for the settlement of claims of the lending institutions.

The lenders need to submit their claims for reimbursement by 15 December 2020.

Key features:

1. The lenders have to credit the difference between compound interest and simple interest to the eligible borrowers by 5 November.

2. The rate of interest in case of education, housing, automobile, personal and consumption loans, will be the rate mentioned in the loan agreement, as on February 29.

3. For credit card dues, the interest rate will be the weighted average lending rate (WALR) charged by the card issuer for transactions financed on an EMI basis from its customers during 1 March-31 August.