Interest on interest waiver: Banks start crediting accounts

Banks have started refunding borrowers the compound interest charged on specified loan accounts during the moratorium period

Last week, the Reserve Bank of India (RBI) had asked all lending institutions, including non-banking financial companies, to ensure that the scheme of waiver of interest on interest for loans up to Rs 2 crore for the six-month moratorium period is implemented by November 5. "Dear customer credited COVID-19 Relief ex-gratia of ... on November 3 to your account," a message from a public sector bank to a customer said. Following directions from the Supreme Court, the government had last month announced the scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts. Housing loans, education loans, credit card dues, auto loans, MSME loans, consumer durable loans and consumption loans are covered under the scheme. However, agriculture and allied activity loans are not part of the waiver. The scheme mandates ex-gratia payment to certain categories of borrowers by way of crediting the difference between compound interest and simple interest for the period between March 1, 2020 to August 31, 2020 by respective lending institutions. The finance ministry had issued the operational guidelines on October 23 in the backdrop of the Supreme Court's direction to implement the interest waiver scheme. The apex court had on October 14 directed the Centre to implement "as soon as possible" interest waiver on loans of up to Rs 2 crore under the RBI moratorium scheme in view of the COVID-19 pandemic, saying the common man's Diwali is in the government's hands. The lending institutions, after crediting the amount, will claim the reimbursement from the central government. The RBI had announced a moratorium on repayment of loans for six months beginning March 1, 2020 to help businesses and individuals tide over financial problems on account of the COVID-19 crisis.