If you did not skip your EMI instalments during the lockdown, you could be eligible for cashback from your bank. The government on late Friday night announced a waiver of interest on interest for loans up to Rs 2 crore irrespective of whether moratorium was availed or not.

“The Government of India has 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 (1.3.2020 to 31.8.2020) (the ‘Scheme’) on 23 October 2020, which mandates ex-gratia payment to certain categories of borrowers by way of crediting the difference between simple interest and compound interest for the period between March 1, 2020, to August 31, 2020, by respective lending institutions,” the Reserve Bank of India said.

Who all are eligible?
The benefit will be extended for loans below Rs 2 crore availed across eight categories: 1) Micro, small and medium enterprises (MSMEs) loans, 2) Education loans, 3) Housing loans, 4) Consumer durables loans, 5) Credit card dues, 6) Auto loans, 7) Personal and professional, 8) Consumption loans.

RBI-regulated lenders, including banks, cooperative banks, housing finance companies, and microfinance institutions will be eligible for the scheme. 

The RBI had in March, after the outbreak of coronavirus, provided a moratorium on repayment of EMIs and credit card dues for three months.  Later, the central bank extended that three-month period till August 31, 2020. However, there was confusion on whether interest on interest during this moratorium period would be charged. So, at that time, a petition was filed in this regard in the Supreme Court. An Agra-based petitioner requested the apex court that no interest should be charged during the moratorium.

How does this work? Key rules users must know

• In the case of credit card dues, the interest rate will be the weighted average lending rate (WALR) charged by the card issuer for transactions financed on an EMI basis from its customers during 1 March to 31 August, the ministry said. Penal interest and penalty for late payment will not be reckoned as part of the contracted rate or WALR.
• The lending institution has to be either a banking company, or a public sector bank, co-operative bank or a regional rural bank, or All India Financial Institution, a non-banking financial institution, housing finance company or a microfinance institution.
• The lenders must credit the difference between compound interest and simple interest to the eligible borrowers by 5 November.