The Reserve Bank of India (RBI) had in March, after the outbreak of the novel coronavirus, provided a moratorium on repayment of EMIs and credit card dues for three months. In order to contain the spread of COVID-19, the central government had announced a country-wide lockdown, which dealt a blow to the economy. So, the moratorium was announced to provide relief to people during the period of economic inactivity.
Later, the central bank extended that three month period till August 31, 2020, in view of the prevailing situation. However, there was confusion on whether interest on interest during this moratorium period would be charged. A petition was filed in this regard in the Supreme Court. The petitioner, a borrower from Agra, requested the apex court that no interest should be charged during the moratorium.
The top court in the due course directed the Centre to implement “as soon as possible" interest waiver on loans of up to Rs 2 crore under the RBI moratorium scheme.
Following which, the Centre gave its nod to the scheme to “grant of ex-gratia payment of difference between compound and simple interest to borrowers of specified loan accounts” from March 1 to August 31.
Besides, those who did not opt for moratorium during the coronavirus lockdown will get an ex gratia payment or a cashback. This is applicable for only individual borrowers and small businesses with loans of up to Rs 2 crore.
The Finance Ministry last week informed about the scheme to all lenders that come under the ambit of the RBI.
What loans are eligible for interest waiver scheme
Here is the list of loans for which the interest waiver scheme is applicable:
• Micro, small and medium enterprises loans
• Housing loans
• Consumer durables loans
• Consumption loans
• Auto loans
• Credit card dues
• Education loans
• Personal and professional
For education, housing, automobile, personal and consumption loans, interests will be charged as per the rate mentioned in the loan agreement and will be the same as prevailing on February 29.
On the other hand, the interest rate will be the weighted average lending rate (WALR) charged by the card issuer or bank for credit card dues during the mentioned period, from March 1 to August 31.