Borrowers pay simple interest on education, housing, car loan for six months

In light of the unprecedented and extreme COVID-19 situation, the government has announced major relief for individuals and MSME borrowers by waiving compound interest on specified loans for a period of six months. Loans eligible for the scheme include MSME loans, education loans, housing loans, durable consumer loans, credit card contributions, car loans, personal loans to professionals, home loans. consumption. The government announced a program called “Scheme for Granting Ex gratia payment of the difference between compound interest and simple interest for six months to borrowers on specified loan accounts (1.3.2020 to 31.8.2020) “.

What does it mean? Simply put, borrowers have to pay simple interest on their loan amount for the six month period between March and August versus compound interest. Borrowers who have paid their contributions on time will receive a reimbursement from the lenders equal to an amount of “compound interest paid – simple interest“.

Here are some important points to note:

Borrowers will be eligible to receive payment whether or not the borrower has fully or partially taken advantage of the repayment moratorium announced by RBI on March 27 earlier this year, which was extended from May 23 to August 31.

Any borrower whose total of all facilities with credit institutions is greater than ??2 crore (sanctioned limits or unpaid amount) will not be eligible for ex gratia payment under this program. In addition, loan accounts must not be non-performing assets (NPA) on the date mentioned above.

The lending institution must be either a banking company, a public sector bank, a cooperative bank or a regional rural bank, or an Indian financial institution, a non-bank financial institution, a housing finance company or a housing institution. micro-finance.

Lenders must credit the difference between compound interest and simple interest to eligible borrowers by November 5.

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