In a relief to borrowers at the start of the festive season, the government announced on Friday evening the waiver of interest on interest for loans of up to Rs 2 crore, regardless of whether the moratorium was taken advantage of or not.
The Department of Financial Services presented operational guidelines in the context of the Supreme Court’s guidance to implement the interest-free scheme, which is likely to cost the Treasury Rs 6,500 crore.
The high court on October 14 instructed the Center to implement “as soon as possible” interest exemption 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 hands of the government.
According to the guidelines, the scheme can be availed by borrowers on specified loan accounts for a period from March 1 to August 31, 2020.
“Borrowers who have loan accounts with sanctioned limits and outstanding amounts not exceeding Rs 2 crore (aggregate of all facilities with credit institutions) on February 29 will be eligible for the scheme,” he said.
According to the eligibility criteria mentioned in the guidelines, accounts must be standardized as of February 29, which means that they must not be Defaulting Assets (NPA).
Home loans, education loans, credit card debt, auto loans, MSME loans, durable consumer loans and consumer loans are covered by the scheme.
Under the scheme, credit institutions must credit the difference between compound interest and simple interest with respect to eligible borrowers in their respective accounts for that period, regardless of whether the borrower has fully or partially taken advantage of the loan repayment moratorium. announced by the RBI on March 27, 2020.
The scheme is also applicable to those who have not taken advantage of the moratorium scheme and have continued to repay the loans.
Credit institutions, after crediting the amount, will claim reimbursement from the central government.
Hearing the matter on October 14, the Federal Supreme Court noted that it was concerned about how the interest-free benefit would be granted to borrowers and said that the Center made a “welcome decision” in taking note of the man’s situation but the authorities have not issued an order in this regard.
“Something concrete needs to be done,” said a panel headed by Judge Ashok Bhushan, adding: “The benefits of exemptions for borrowers of up to Rs 2 crore must be implemented as quickly as possible.”
The high court, which posted the matter for a hearing on November 2, told defenders who attended the Center and banks that “Diwali is in your hands”.
The Center recently told the high court that going beyond fiscal policy decisions already made, such as waiving compound interest charged on loans of up to Rs 2 crore for a six-month default period, can be “detrimental” to the economic scenario In general, the national economy and banks may not assume “inevitable financial constraints”.
The high court is hearing a series of petitions that have raised questions related to the announced six-month loan default period due to the COVID-19 pandemic.
The bench, also made up of judges R S Reddy and M R Shah, said that when the authorities decide something, it must be implemented.