At the onset of the festive season, the government announced waiver of interest on interest for loans up to Rs 2 crore irrespective of whether moratorium was availed or not.
At the onset of the festive season in India, the finance ministry has delivered a reason for cheer to those who have outstanding loans. The government on Friday issued guidelines for a scheme under which it would pay the interest on interest for those who have or had outstanding loans (during the last six months) for MSME, education, automobiles, housing and even had credit card payments due, under the six-month moratorium on repayments announced by the Reserve Bank of India.
In a significant move, the benefit of the scheme would include those who availed of the moratorium, partially used the moratorium and those who didn't avail the relief.
The government on Friday issued the guidelines for the scheme after the approval by the cabinet committee on economic affairs last Wednesday. The order said that the scheme for the ex-grati payment of difference between the compound interest and simple interest or simply put interest on interest for six months for MSME loans, education loans, loans, consumer durable loans, personal loans auto loans and credit card dues has been cleared.
The cost of this scheme for the government is expected to be in Rs 5,500-6,000 crore range.
This scheme only covers borrowers who have loans up to Rs 2 crore. The CCEA had cleared the proposal as a response to the Supreme Court order on the waiver of compound interest or "interest on interest" for the 6 month moratorium period following the coronavirus pandemic.
The guidelines were issued by the department of financial affairs or the banking department of the finance ministry on Friday and sent to all nationalised banks, all india financial institutions, all banking companies, urban cooperative banks, state cooperative banks and housing finance companies for implementation.