Relief to borrowers: Timely EMI payers may be rewarded2 min read . Updated: 19 Oct 2020, 06:38 PM IST
The waiver will extend benefit to all types of loans, including home mortgages, and to borrowers who paid their EMIs during the duration of the moratorium
As a relief to borrowers, the Central government plans to waive compound interest on equated monthly instalments (EMIs) of loans valued at up to ₹2 crore, as per a report.
The waiver will thereby extend the benefit to all types of loans, including home mortgages, and to borrowers who paid their EMIs during the duration of the moratorium, two officials aware of the plan said, according to a report by Hindustan Times.
The plan to waive interest on interest during the moratorium between March 1 and August 31 is a work in progress and a formal announcement is expected before Diwali, the officials told HT, requesting anonymity.
“There should not be any sector-specific discrimination. It is not prudent to exempt interest on interest for personal loans only and deny the same for home loans. It will be extended to all those who have taken loans up to ₹2 crore, which is a reasonable limit," said one of the officials, who is in a senior position in the finance ministry.
In March, in order to mitigate the hardships faced by the borrowers during coronavirus pandemic, Reserve Bank of India allowed the lenders to grant a loan moratorium for for three months of EMI (Equated Monthly Instalments), falling due between March 1 and May 31 2020. Later, RBI extended it for further three month till August 31.
“The compound interest exemption during the moratorium period will be equally available to all borrowers – those who availed the six-month moratorium and those who continued paying [their EMIs] even during the six-month period," the official said to HT.
Later, RBI permitted the lenders a one-time restructuring of loans without classifying them as non-performing assets to help companies and individuals manage the financial stress caused by coronavirus pandemic. Only those companies and individuals whose loans accounts are in default for not more than 30 days as on 1 March, 2020, are eligible for one-time restructuring. For corporate borrowers, banks can invoke a resolution plan till 31 December, 2020 and implement it till 30 June, 2021.
For personal loans, banks have an option to invoke the resolution plan till December 31,2020 and implement it within 90 days from the date of invocation. Accounts which are standard, but not in default for more than 30 days as on March 1,2020 will be eligible for restructuring.
Meanwhile, the Supreme Court last Wednesday said the centre should implement "as soon as possible" interest waiver on loans of up to ₹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 apex court sought know from the Centre as to whether the benefit of loan interest waiver for borrowers of up to ₹2 crore during the moratorium period has “percolated" to the common man.
The compound interest waiver will ensure that the government’s decision will not have any adverse financial impact on commercial banks, which is in line with the suggestion of an expert panel chaired by formal Comptroller and Auditor General of India, Rajiv Mehrishi. Based on the report, the government has decided to reimburse banks for their losses on this account, the official added.