New Delhi: Ahead of the SC hearing on loan moratorium extension plea today, the banks on Wednesday started rolling out the ‘interest on interest’ charged from the customers on loans and credit cards during the moratorium period. The individual borrowers and small businesses with loans of up to Rs 2 crore will be eligible for the cashback from the banks or financial institutions. Note that those who have not opted for the moratorium will also be eligible for the refund by the banks.
To recall, in the wake of COVID-19 outbreak, the Reserve Bank of India (RBI) in March announced moratorium on repayment of EMIs and credit card dues for three months. The moratorium period was later extended further for another three months till 31 August.
Following the order of the Supreme Court, the government later approved the scheme to ‘grant of ex-gratia payment of difference between compound and simple interest to borrowers of specified loan accounts’ from 1 March to 31 August. Last week, RBI asked all the lending institutions, including non-banking financial companies to ensure that the interest waiver scheme is implemented by 5 November.
“All Primary (Urban) Cooperative Banks/State Cooperative Banks/District Central Cooperative Banks, All All India Financial Institutions and All Non-Banking Financial Companies (including Housing Finance Companies) to be guided by the provisions of the scheme and take necessary actions within the stipulated timeline therein,” the central bank said in its recent affidavit.
Under the interest waiver scheme, the interest-on-interest waiver benefit will be extended for loans below Rs 2 crore availed across eight categories including Micro, small and medium enterprises (MSMEs) loans, Education loans, Housing loans, Consumer durables loans, Credit card dues, Auto loans, Personal and professional, Consumption loans. However, agriculture and allied activity loans are not part of the waiver.
Credit card users will also get the benefits of interest waiver scheme as in case of credit card dues, the interest rate will be the weighted average lending rate (WALR) charged by the card issuer for transactions financed on an EMI basis from its customers during 1 March-31 August. Penal inteterest and penalty for late payment will not be reckoned as part of the contracted rate or WALR……..Read More>>