Guidelines Issued by Ministry of Finance after Top Court Directions for Interest Waiver on Loans

24th October 2020

What can be seen as an early Diwali gift to borrowers, the Ministry of Finance on Wednesday issued guidelines for interest waivers on loans up to Rs. 2 crores, in view on the ongoing COVID-19 situation. This comes on the heels of the recent direction to the Centre from the top court to bring in guidelines for interest waiver under the moratorium scheme of the Reserve Bank of India (RBI).

The scheme is available to borrowers on specific loan amounts for the duration of five months, starting March 1 and ending August 31, 2020. The operational guidelines brought in the by the Department of Financial Services states that “Borrowers 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 February 29 shall be eligible for the scheme”. Under this scheme, the relief would be for education loan, auto loan, housing loan, consumption loan, MSME loan, credit card dues and consumer durable loan borrowers. However, the scheme is only applicable for those borrowers, who have continued their repayment of loans and have not gone for moratorium scheme.

However, there is a flip side to this provision as well; the lending institutions will get reimbursement for waiver amount from the Centre, and which could go up to a tune of Rs. 6500 crores. The Centre was quite sceptical about the implementation of the scheme, with it already finding it difficult to control the falling economy; however, it complied with the decision made by the Supreme Court.