In a festival gift to borrowers, the Government has notified a Scheme for grant of ex-gratia payment of difference between compound interest & simple interest for 6 months of loans up to Rs 2 crore for borrowers in specified accounts from 1 March, 2020 to 31 August, 2020. The Supreme Court has directed further to central government to implement the scheme of interest waiver on loan as soon as possible.
Benefits under Scheme would be routed through Lending Institutions
The government notified eligibility criteria for ex-gratia payment under the scheme. The borrowers of MSME loans, Housing loans, Education loans, Credit card dues, Consumer durable loans, Automobile Loans, Personal loans to professionals, Consumption loans who have loan accounts having sanctioned limits and outstanding amount of not exceeding to Rs. 2 crore as on February 29, 2020, must be eligible under this Scheme.
Read our article:A Complete Guide on Operational Manual of the NBFCs
Name of the Lending Institution
- 1. SBI (State Bank of India[1])
- AIFIs (All India Financial Institutions)
- ANB (All Nationalised Banks)
- All Urban Co-operative Banks, Banking Companies, and NBFCs (Non-Banking Financial Companies) registered with Reserve Bank of India
- All NBFC— Micro Finance Institutions being members of an RBI-recognised Self-Regulatory Organisation through MFIN Micro Finance Institutions Network and Sa-Dhan
- All District Central Co-operative Banks, State Co-operative Banks, and Regional Rural Banks (RRBs) [via the rural banking system supervisor of NABARD National Bank for Agriculture and Rural Development
- All HFCs (Housing Finance Companies) registered with the NHB (National Housing Bank) through the supervisor of National Housing Bank
Eligibility Criteria for ex-gratia Payment under the Scheme
- Firstly, an Account has to be standardised as of February 29, 2020, i.e., the loan must not be for Non-Performing Asset (NPA).
- Secondly, the lending institution must be either a banking company, or a Public Sector Bank, or a Regional Rural Bank, or Co-operative Bank or an All India Financial Institution, a Housing Finance Company or a Non-Banking Financial Company registered with the RBI or National Housing Bank as a case may be.
- The Non-Banking Financial Company, Micro Finance Institution must be a member of a Self-Regulatory Organisation (SRO) recognized by RBI.
- Thirdly, a ex-gratia payment under the scheme will be admissible irrespective of whether a borrower in the sub-clause (1) had fully availed or partially availed or not availed of moratorium on repayment announced by RBI
Grievance Redressal Mechanism on Interest waiver on Loan
Issues & concerns relating to claims submitted by the lending institutions must be handled by the designated cell at SBI in consultation with a Government of India. Each lending institution must put in place the grievance redressal mechanism for an eligible borrower for redressal of their grievances arising out of present scheme within one week from a date of issuance of these scheme guidelines, at appropriate levels.
While putting in place such grievance redressal mechanism, lending institutions can communicate for the guidance issued by the Indian Banks Association in respect of resolution framework for COVID- 19 related stress. Grievances of the lending institutions must be resolved through a designated cell at SBI in consultation with Ministry of Finance, Government of India.
Amount Credited in borrower account’s under ex-gratia Payment Scheme
The benchmarks and modalities for ex-gratia payment of difference between compound interest and simple interest under the scheme would be as detailed separately. The rate of interest was prevailing on 29 Feb 2020. In case, a rate of interest has changed, it shall not be reckoned for the purposes of the computation.
The payable ex-gratia amount has to be credited in an account of a borrower by the respective lending institutions under ex-gratia payment scheme. The crediting amount in the respective accounts of an eligible borrower by the respective lending institution has to be completed on or before 5th Nov 2020.
The lending institutions can lodge their claim for reimbursement latest by 15th Dec 2020. Claims have to be submitted to designated officer cell at the State Bank of India (SBI). SBI is advised to appropriately process the amount its designated officer cell in a timely manner, and to notify details for the same on its website.
Conclusion
The government directed interest waiver on loan the entire nationalized bank to convey that in view of an unprecedented and extreme COVID-19 situation, the Central Govt has approved the scheme for grant of ex-gratia payment of difference between compound interest and simple interest for 6 months to borrowers in specified loan accounts. Corpbiz shall be at your disposal if you need any assistance regarding grant of ex-gratia payment.
Read our article:Regulations governing NBFCs in India: A Complete Overview
Scheme-Letter-1
