Earlier this month, all lending institutions were asked to implement provisions of Scheme for grant of ex-gratia payment of the difference between compound and simple interest for six months to borrowers in specified loan accounts (1 March to 31 Aug). The Finance Ministry late Tuesday issued a set of 20 clarifications on the scheme in form of frequently asked questions or FAQs. 

The relief covers segments including MSME loans, education loans, housing loans, consumer durable loans, credit card dues, automobile loans, personal loans to professionals and consumption loans. Borrowers must know that to avail the scheme, they have to be eligible as per the conditions laid by the ministry and that there are some loans which are not eligible under this scheme.

Agriculture and allied activity loans are not eligible for the interest on interest waiver, the finance ministry has clarified. On the other hand, credit card dues outstanding as on February 29 would be considered for giving relief to the borrowers. Also, crop and tractor loans come under agriculture and allied activities loans and are not part of the eight segments or classes eligible under the scheme. 

To recall, last Friday, the government announced the scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts. Loan accounts with sanctioned limits and outstanding not exceeding Rs 2 crore (aggregate of all facilities with all the lending institutions) will be eligible and such accounts should be standard in the books of the lending institutions as on cut off date of February 29, 2020.

The period reckoned for refund shall be from March 1 to August 21, 2020, that is six months period or 184 days. The ex-gratia relief will be credited to the account of all eligible borrowers without any requirement to apply. As per the scheme, the lending institutions shall credit the difference between compound interest and simple interest in respective accounts for the said period irrespective of whether the borrower fully or partially availed the moratorium on repayment of loan announced by the RBI on March 27, 2020.

The scheme is also applicable on those who have not availed the moratorium scheme and continued with the repayment of loans.