Compound Interest Waiver Scheme applies to everyone but provides limited relief — Here’s everything you need to know
- The government’s
Compound Interest Waiver Schemeapplies to all retail loans under ₹2 crore, regardless of whether they availed the moratorium in the six months between March to August.
- The government will grant these borrowers an ex-gratia payment of the difference between the
compound interestdue and the simple interest.
- This means borrowers will still have to repay the simple interest and the principal amount back from their own pockets.
AdvertisementThe Compound Interest Waiver Scheme was released by Indian’s Ministry of Finance on October 23. It waives interest-on-interest or compound interest on certain categories of loans upto ₹2 crore.
Not only does this apply to borrowers who availed the moratorium option issued by the Reserve Bank of India (RBI) to defer repayment of EMIs and other loans, but also to all others who may have loans of less than ₹2 crore.
However, the scheme only waives of compound interest. This is the amount of interest that is specifically charged only on the interest payment that is due, not on the principal amount itself.
A person’s loan repayment plan will continue on the terms that have already been set out. Borrowers will still have to pay back the principal amount and the simple interest.
Which loans are eligible under the Compound Interest Waiver Scheme?
Retail loans such as home, education, auto, personal loans and credit card debt of upto ₹ 2 crore are eligible for this relief.
- MSME loans
- Education loans
- Housing loans
- Consumer durable loans
- Credit card dues
- Automobile loans
- Personal loans to professionals
The RBI first introduced the moratorium in March to help businesses and salaried employees weather the storm created by the pandemic. It was later extended until August 31.
Now that the moratorium period is over, the government will grant borrowers ex-gratia payment of the difference between the compound interest and the simple interest for the six months of the moratorium.
This will cover loans where instalments were due between March 1 and August 31, including both the first-phase and second-phase of the moratorium.
The lenders must issue the payment on or before November 5.
Who is eligible to avail the compound interest interest waiver scheme?
To be eligible, the loan account should be a standard account. This means that as of February 29, it should not defaulted on payments or have been tagged as an NPA.
Even if one has not opted for the moratorium, they can opt in for this relief scheme. It is not limited to full time moratorium borrowers. Borrowings by non-banking financial corporations (NBFCs) and housing finance corporations (HFCs) will also qualify under this scheme.
Kotak Mahindra Bank still on ‘alert’ as profit improves 27% over the last three months
National Security Advisor lays ‘New India’ doctrine ahead of Pompeo’s visit to India
IndusInd Bank shares rally 4% after promoters refute reports of merger with Kotak Mahindra Bank
Popular on BI
- A Trump spokeswoman mocked Pete Buttigieg's military service in a Memorial Day weekend spat with Ron DeSantis
- Family stands to lose nearly $6,000 in airfare and hotel costs after they were bumped from an overbooked cruise ship
- Flyers are 'skiplagging' to try and save money on flight tickets. Airlines hate it.
- These are must to do activities in Shimla on your next visit
- ONGC to invest ₹1 lakh cr in energy transition, targets net-zero by 2038
- List of famous things to buy in Shimla
- With Rupay Credit Card on UPI, mobile payments pioneer Paytm deepens its leadership in UPI
- Screen-sharing and usernames on WhatsApp soon: All you need to know