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Last Date for Lenders to Credit Interest-on-interest in Borrower Accounts Today; All You Need to Know

Representative Image of an Axis Bank branch.

Representative Image of an Axis Bank branch.

Banks who make payments to borrowers can claim the amount by December 15 at State Bank of India. The Union government will compensate the lenders for crediting the difference between compound interest and simple interest.

Lenders have been directed to credit in the accounts of eligible borrowers the difference between compound interest and simple interest collected on loans of up to Rs 2 crore during the RBI's loan moratorium scheme by today. The Centre in the last week of October informed the Supreme Court about its directions to banks.

Banks who make payments to borrowers can claim the amount by December 15 at State Bank of India. The Union government will compensate the lenders for crediting the difference between compound interest and simple interest.

Background

Following the outbreak of the COVID-19 and subsequent lockdown in March, economic activities came to a standstill. Taking into consideration the prevailing situation at that time, the Reserve Bank of India had in March provided a moratorium on repayment of EMIs and credit card dues for three months.

Later, the RBI extended this three month period till August 31 as the economy was still not on the track. However, confusion prevailed at that time whether interest on interest during this moratorium period would be charged.

A petition was filed in the Supreme Court that no interest should be levied during the moratorium. The apex court in the due course directed the Centre to provide interest waiver on loans of up to Rs 2 crore under the RBI moratorium scheme.

After the apex court’s directive, the Centre approved the scheme to “grant of ex-gratia payment of difference between compound and simple interest to borrowers of specified loan accounts”. It was for the six month period, from March 1 to August 31.

Micro, small and medium enterprises, housing, consumer durables, consumption, auto, credit card dues, education and personal and professional loans are eligible for the interest waiver scheme.

Important points about the scheme

· Those loans which are non-performing asset (NPA) as on February 29 are not eligible for the scheme.

· The differential amount has been calculated based on the rate of interest prevailing as on February 29.

· All the eligible borrowers whether they availed the moratorium for full six months, or partly availed will get the refund. Besides, those who did not avail of the scheme will receive the differential amount in their accounts.


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