The Indian government will waive “interest on interest” charges for loans of up to 20 million rupees ($273,000) during its six-month repayment moratorium because of the pandemic, The Times of India reported, citing a finance ministry affidavit to the Supreme Court on Friday. Also read: Supreme court gives green signal to the scheme proposed by govt on air ticket refunds booked during the lockdown
The new waiver will benefit small borrowers, and will include those who have cleared their dues, for a range of loans made between March and August, the report said. The government will bear the burden of the money lost by banks because of the waiver, the finance ministry said in the affidavit.
The compound interest will be scrapped for loans taken out for purposes including education, housing, and credit-card dues, the report cited the ministry as saying.
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The Reserve Bank of India had allowed borrowers to seek a six-month moratorium on loans but banks and housing finance companies were imposing charges on both the principal and the interest, which translated into the repayment period being extended by more than six months.
Agra resident Gajendra Sharma, in a plea before the Supreme Court, has demanded the waiver of interest charged by banks on the installments deferred for repayment by the Reserve Bank of India through a moratorium. Industry associations have joined the cause with the original petition, demanding the waiver of interest, or waiver of interest on interest, on the suspended monthly installments.
A government-appointed committee has given its recommendations on the impact of waiving interest and interest on interest on the national economy and financial stability. The Indian Banks’ Association (IBA) told the committee that instead of a waiver, it may ask the government to provide relief to borrowers.
Mean-while, India on Friday registered 79,476 new Covid-19 cases, taking the tally to 64,73,545. With 1,069 fatalities in 24 hours, India has crossed yet another grim milestone of 100,000 COVID-related deaths, becoming the third country to do so. With a high level of recoveries, India was maintaining its global position as the country with the highest number of recovered Covid-19 patients, said the Ministry of Health on Friday.
