Central govt issues guidelines for implementation of interest waiver on loan

Central government on Saturday approved scheme for grant of ex-gratia payment of difference between compound interest & simple interest for six months to borrowers in specified loan accounts. As per the operational guidelines issued by Department of Financial Services, the scheme can be availed by borrowers in specified loan accounts for a period from March 1 to August 31, 2020.

In view of the unprecedented and extreme COVID-19 situation, the Central Government has approved “Scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts (1.3.2020 to 31.8.2020)”. Benefits under the scheme would be routed through lending institutions. 

Eligibility criteria for ex-gratia payment under the scheme are as follows:

(a) Borrowers in the following segments/classes of loans, who have loan accounts having sanctioned limits and outstanding amount of not exceeding Rs. 2 crore [aggregate of all facilities with lending institutions] as on 29.2.2020, shall be eligible under the Scheme:

(i) MSME loans

(ii) Education loans

(iii) Housing loans

(iv) Consumer durable loans

(v) Credit card dues

(vi) Automobile loans

(vii) Personal loans to professionals

(viii) Consumption loans

Any borrower whose aggregate of all facilities with lending institutions is more than Rs. 2 crore (sanctioned limits or outstanding amount) will not be eligible for ex-gratia payment under this scheme.

(b) The aforesaid eligibility shall be subject to the following further conditions and stipulations:

(i) Account should be standard as on 29.2.2020, i.e., loan should not be a Non-Performing Asset (NPA) as on 29.2.2020.

(ii) Lending institution must be either a banking company, or a Public Sector Bank, or a Co-operative Bank [i.e., an Urban Co-operative Bank or a State Co-operative Bank or a District Central Co-operative Bank], or a Regional Rural Bank, or an All India Financial Institution, or a Non-Banking Financial Company or a Housing Finance Company registered with RBI or National Housing Bank as the case may be. A Non-Banking Financial Company— Micro Finance Institution should be a member of a Self-Regulatory Organisation (SRO) recognised by RBI.

(iii) The ex-gratia payment under this scheme shall be admissible irrespective of whether the borrower in sub-clause (1) had fully availed or partially availed or not availed of the moratorium on repayment announced by RBI ride its circular DOR.No. BP.BC.47/21.04.048/ 2019-20, dated 27.3.2020 and extended on 23.5.2020.

3. The period to be reckoned for crediting of difference between compound interest and simple interest by the lending institutions mentioned in paragraph 2(b) (ii) above to eligible borrowers as per paragraph 2 above would be from 1.3.2020 to 31.8.2020 (six months / 184 days). For accounts closed during the said period, the period for crediting would be from 1.3.2020 and restricted to the date of closure of such account.

4. The benchmarks and modalities for ex-gratia payment of difference between compound interest and simple interest under the scheme would be as detailed in the attached operational guidelines. The rate of interest would be as prevailing on 29.2.2020, i.e., in case the rate of interest has changed thereafter, it shall not be reckoned for the purposes of this computation. The payable ex-gratia amount shall have to be credited to the account of the borrower by the respective lending institutions as ex-gratia payment under the scheme.

5. The aforesaid exercise of crediting the amount as stated above in the respective accounts of the eligible borrowers described in paragraph 2 above bythe respective lending institution shall be completed on or before 5.11.2020.

6. After the exercise mentioned in paragraph 5 above has been completed, lending institutions can lodge their claim for reimbursement latest by 15.12.2020. Claims shall be submitted to designated officer(s) / cell at the State Bank of India (SBI). SBI is advised to appropriately equip its designated officer(s) / cell for processing such claims in a timely manner, and to notify details of the same on its website.

7. Issues and concerns relating to claims submitted by the lending institutions shall be handled through the designated cell at SBI in consultation with Government of India. Each lending institution shall put in place a grievance redressal mechanism for the eligible borrowers for redressal of their grievances arising out of the present scheme within one week from the date of issuance of these scheme guidelines, at appropriate level(s). While putting in place such grievance redressal mechanism, lending institutions can keep in mind the communication dated 1.10.2020 issued by the Indian Banks’ Association in respect of resolution framework for COVID- 19 related stress for guidance. Grievances, if any, of the lending institutions shall be resolved through the designated cell at SBI in consultation with the Ministry of Finance, Government of India.

8. In case of any issues/queries relating to interpretation of this scheme, the decision of Government of India shall be final.