RBI asks lending institutions to implement waiver of interest on interest schemes.

The Reserve Bank of India has asked all the lending institutions to implement the waiver of interest on interest schemes for loans up to Rs 2 crore. The lending institutions also including non-banking financial companies.

Highlights

The RBI has urged the banks to implement the interest waiver for a moratorium period of six months. The lending institutions have now been mandated to grant ex-gratia payment for certain categories of borrowers by crediting the difference between simple interest and compound interest in between March 1- August 31, 2020. The centre, on October 23, had announced a scheme that granted ex-gratia payment of difference between compound interest and simple interest for six months for borrowers for specified loan accounts.

Background

The Reserve Bank of India had announced a moratorium on repayment of loan for six months in effect from March 1, 2020. The moratorium was provided in order to help businesses and individuals to overcome the financial problems that they faced during the COVID-19 lockdown because of disruption in normal business activities . Later, the Supreme Court had asked the Centre to implement the interest waiver scheme on loans up to Rs 2 crore under the RBI moratorium scheme on October 14, 2020.

RBI Notification

The Reserve Bank in its notification has urged all the lending institutions that they should be guided by the scheme’s provisions and take necessary action within the timeline.

Interest Waiver Scheme

Under this scheme, the lending institutions have been advised to grant the difference between compound interest and simple interest to the eligible borrowers in their respective accounts for the prescribed period. The difference will be granted to all the borrower who have either fully or partially availed the moratorium announced by the RBI on March 27, 2020. The scheme covers the education loans, MSME loans, credit card dues, housing loans, consumer durable loans, auto loans and consumption loans. However, the lending institutions can claim reimbursement from the centre after they credit the amount.