- Awaiting the Supreme Court hearing results on loan moratorium extension the banks have started rolling out the ‘interest on interest’ charged from the customers on loans and credit cards during the moratorium period.
- The individual borrowers and small businesses with loans of up to Rs 2 crore will be eligible for the cashback from the banks or financial institutions.
- Those who have not opted for the moratorium will also be eligible for the refund by the banks.
- It may be noted that due to COVID-19 outbreak, the Reserve Bank of India (RBI) in March announced moratorium on repayment of EMIs and credit card dues for three months. The moratorium period was later extended further for another three months till 31 August.
- Following the order of the Supreme Court, the government later approved the scheme to ‘GRANT OF EX-GRATIA PAYMENT OF DIFFERENCE BETWEEN COMPOUND AND SIMPLE INTEREST TO BORROWERS OF SPECIFIED LOAN ACCOUNTS from 1st March to 31st
- Last week, RBI asked all the lending institutions, including non-banking financial companies to ensure that the interest waiver scheme is implemented by 5 November.
- Also, the Central Bank has said that all Primary (Urban) Cooperative Banks/State Cooperative Banks/District Central Cooperative Banks, All All India Financial Institutions and All Non-Banking Financial Companies (including Housing Finance Companies) to be guided by the provisions of the scheme and take necessary actions within the stipulated timeline therein.
- Under the interest waiver scheme, the interest-on-interest waiver benefit will be extended for loans below Rs 2 crore availed across eight categories including Micro, small and medium enterprises (MSMEs) loans, Education loans, Housing loans, Consumer durables loans, Credit card dues, Auto loans, Personal and professional, Consumption loans. However, agriculture and allied activity loans are not part of the waiver.
- Credit card users will also get the benefits of interest waiver scheme as in case of 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.
- Penal interest and penalty for late payment will not be reckoned as part of the contracted rate or WALR.
