The government has said that it will implement a loan relief scheme by November 5, aimed at helping borrowers during the coronavirus pandemic, and reimburse the interest on interest applicable to eligible loan repayments due between March and August. In guidelines on the loan relief released on Wednesday, the Department of Financial Services said the relief will be available to the borrowers regardless of whether they opted to defer their EMIs, either fully or partially. The government said lending institutions will first credit the amount – the difference between compound interest and simple interest for the six-month period – on eligible loans up to Rs 2 crore, which will be reimbursed by the government as part of the scheme.
Here are 10 things to know:
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According to operational guidelines issued by Department of Financial Services, the scheme can be availed by borrowers in specified loan accounts for a period from March 1 to August 31, 2020.
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The relief on compound interest will be applicable to standard accounts on February 29, 2020, and the scheme will be implemented by November 5, according to the official notification.
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The rate of interest would be reckoned as the rate in the loan agreement, the notification said. Any change in the rate after February 29 will not be reckoned for the scheme.
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The scheme is meant for personal and MSME or micro, small and medium enterprises loans up to Rs 2 crore as well as credit card dues. Housing, education, automobiles and consumer durables loans are also covered in the scheme.
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The government will have to shell out Rs 6,500 crore for the implementation of the scheme, news agency PTI reported quoting sources.
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On October 14, the Supreme Court had directed the government to implement the interest waiver on loans of up to Rs 2 crore under the Reserve Bank of India’s moratorium scheme “as soon as possible” in view of the COVID-19 pandemic.
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Any delay in implementing a waiver on “interest on interest” on loans up to Rs 2 crore is not in the interest of the common man, the bench – comprising Justices Ashok Bhushan, R Subhash Reddy and MR Shah – had said. (Also Read: “Common Man’s Diwali…”: Top Court Nudge For Loan Relief By November 2)
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The Supreme Court has listed the matter for hearing on November 2. The top court is hearing a batch of petitions which have raised issues concerning the six-month loan moratorium period announced by the RBI in order to support borrowers against the COVID-19 pandemic.
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In March, the RBI had granted borrowers an option to delay their EMIs for six months, till August 31, as the coronavirus pandemic-related restrictions caused a record 23.9 per cent contraction in the economy in the quarter ended June 30.
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The RBI and the government have already told the top court that the moratorium can be extended by up to two years.