Those who did not opt for a moratorium during the lockdown period will get an ex-gratia payment or cashback in their accounts by the respective banks on or before November 5. This comes after the Centre approved a scheme to provide relief in interest compounding to borrowers for the six-month loan moratorium period extended in view of the COVID-19 pandemic. The payment will be made to small businesses and individual borrowers with loans up to Rs 2 crore.
The relief will be extended through financial institutions like banks, non-banking financial companies (NBFCs), NCFC – Micro Finance Institutions, National Banks for Agriculture and Rural Development, housing finance companies, National Housing Banks, etc.
“The undersigned is directed to convey that in view of the unprecedented and extreme COVID-19 situation, the Central government has approved scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months to borrowers in specified loan amounts (March 1, 2020, to August 31, 2020). Benefits under the scheme would be routed through lending institutions,” the Ministry said in an official order on Friday.
Who will be eligible?
Borrowers in the segments — MSME loans, education loans, housing loans, consumer durable loans, credit card dues, automobile loans, personal loans to professionals, and consumption loans — who have loan accounts having sanctioned limits and outstanding amount not exceeding Rs 2 crore as on February 29, 2020, will be eligible under the scheme.
How the scheme will work?
After crediting the amount into the customer’s account, banks can claim it from the government. If the borrower has fully repaid the loan in between, the benefit would be calculated for the moratorium period when the amount was outstanding, reported Times of India.
When the cashback is expected to be credited?
The exercise of crediting the amount in the respective accounts of the eligible borrowers by the respective lending institution shall be completed on or before November 5, the government’s order said.
“After the exercise has been completed, lending institutions can lodge their claim for reimbursement latest by December 15, 2020. Claims shall be submitted to designated officers/ cell at the State Bank of India. SBI is advised to appropriately equip it’s designated officers/cell for processing such claims in a timely manner and to notify details of the same on its website,” it added.
About loan moratorium
The RBI had announced a moratorium on repayment of debt for six months beginning March 1, 2020, to help businesses and individuals tide over the financial problems on account of disruption in normal business activities. The six-month moratorium period ended on August 31.