Loan Moratorium: Didn’t Lending IMEs Fail? Banks are starting to roll out cashback
New Delhi: Ahead of the SC hearing on the plea to extend the moratorium on loans today, banks on Wednesday began rolling out “interest on interest” charged to customers on loans and credit cards during the moratorium period. Individual borrowers and small businesses with loans of up to Rs 2 crore will be eligible for cashback from banks or financial institutions. Note that those who have not opted for the moratorium will also be eligible for reimbursement by the banks.
As a reminder, following the COVID-19 epidemic, the Reserve Bank of India (RBI) announced in March a moratorium on the reimbursement of IMEs and credit card dues for three months. The moratorium period was then extended for another three months until August 31.
Following the Supreme Court order, the government then approved the program to “grant ex gratia payment of the difference between compound and simple interest to borrowers of specified loan accounts” from March 1 to August 31. Last week, RBI called on all lending institutions, including non-bank financial corporations, to ensure that the interest relief regime is implemented by November 5.
“All primary (urban) cooperative banks / state cooperative banks / central district cooperative banks, all Indian financial institutions and all non-bank financial corporations (including housing finance companies) should be guided by the provisions of the program and take the necessary actions within the timeframe stipulated therein, “the central bank said in its recent affidavit.
Under the interest relief scheme, the interest on interest exemption will be extended to loans below 2 crore rupees, broken down into eight categories, including loans to micro, small and medium enterprises (MSMEs), loans education, home loans, consumer loans, credit. card contributions, Auto loans, Individuals and professionals, Consumer loans. However, loans for agriculture and related activities are not part of the waiver.
Credit card users will also benefit from the Interest Relief Scheme, as in case of credit card contributions, the interest rate will be the Weighted Average Interest Rate (WALR) charged by the card issuer. for transactions financed on an EMI basis by its clients during March 1-August 31. Late payment interest and late payment penalties will not be included in the contractual rate or WALR.