10 Important Points About Interest Waiver During Lockdown
The Reserve Bank of India instructed all banks and other financial institutes, including NBFCs about Interest waiver during Lockdown.
To implement the Interest waiver during Lockdown for loans up to 2 crores. Its for the six months loan moratorium period starting March 1, 2020 to 31.08.2020.
The Central Government has also informed the Supreme Court that all lending institutes have been instructed to credit in the accounts of eligible borrowers before November 5.
The difference between compound interest and simple interest.
On loans by the borrower up to 2 crore during the lockdown and by the RBI’s loan interest waiver during moratorium scheme.
10 important points to consider before getting Interest waiver during Lockdown:
1) The Government of India had issued the operational guidelines after the Supreme Court’s direction to implement the interest waiver scheme.
2) As per instruction to Banks Interest will be credited to certain categories of borrowers. Crediting the difference between simple interest and compound interest for the period between March 1, 2020. To August 31, 2020 by banks and respective lending institutions.
This loan moratorium on repayment of debt for six months beginning March 1, 2020. To 31.08.2020 to help businesses and individuals tide over the financial problems on account of disruption in normal business activities due to covid and lockdown.
3) This facility is expanded to
A) Home loan interest waiver scheme, B) Education loans, C) Car Loans, D) Credit card dues. E)auto loans, F)MSME loans, G)consumer durable loans and H)consumption loans are covered under the scheme. Loan against FDs and gold are not eligible,
4) This benefit is also applicable on those who have not availed the loan moratorium scheme and continued with the repayment of loans. This will benefited to regular installment paying customers.
5) The Banks and lending institutions after crediting the amount will claim the amount from the central government.
How much it costs Government
6) It will cost the government about Rs. 7,500 crore and 75% of the borrowers will benefit from the interest-on-interest concession for small loans.
7) CRISIL’s analysis shows a complete interest waiver (including interest on interest) for eligible loans up to 2 crore which would be a difficulty of Rs. 1.5 lakh crore impact. This could raise one another challenges for the government as well as the financial sector. Waiver of only interest-on-interest will have manageable impact.
8) This Facility or scheme is only applicable to those accounts which are standard as on 29.02.2020.
9) The benefit depends on the loan amount and interest rate. Who have a higher rate of interest get higher refunds.
10)Borrowers of unsecured, micro and gold loans and high interest loans will benefit more than those who had taken home loans.
Some other updates regarding Interest on Interest and other important points about interest waiver during Lockdown
Affidavit submitted by Reserve Bank of India in the supreme court saying that loan moratorium more than six months may result in spoiling the overall credit discipline. Which will have a “weakening impact” on the process of lending in the economy.
Banking institutes first credit the refund amount to the borrower’s account before 5 November. Then claim this amount reimbursement from the central government.
In the beginning of the lockdown government offered a loan moratorium for loan means its deferment of interest and installment.
Many of us thought that was waiver, actually that was not waiver its loan moratorium or deferment of interest.
All the borrowers who have maintained their loan account standard. Who have made timely payment pre-COVID-19 are eligible for this credit.
Those who opted for a loan moratorium have to pay simple interest only instead of compounding interest.
State Bank of India (SBI) is nodal agency under this scheme. SBI will receive funds of waived interest on interest from the government for settlement of claims of the lending institutions.
Bank have been asked to give credit waiver to customers before 5 November. Bank to submit their claims for reimbursement by 15 December 2020.
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