Are you eligible for refund under interest waiver scheme? Check new rules

The government on Tuesday evening issued ‘frequently asked questions’ on its scheme to refund the compound interest on loans by borrowers, during the loan moratorium period from March-August, 2020, following an ongoing petition in the Supreme Court. 

The government clarified that borrowers will be entitled to get a refund on an aggregate sum of Rs 2 crore borrowed from the banking system, due for repayment during this period. Credit card dues will also be eligible, the government said.

Here are a few key highlights of the scheme:

FOR BORROWERS

*All loan accounts with sanctioned limits and outstanding not exceeding Rs 2 crore as on 29.02.2020 will be eligible

*The eligibility limit of Rs 2 crore as borrowed sum has to be an aggregate loan taken from the banking system

*The package will be available for eligible borrowers irrespective of whether they have availed or partially availed or not availed the moratorium on repayment announced by RBI

*Loan accounts should be standard in the books of the lending institutions as of 29.02.2020 i.e. they should not be non-performing assets

*The following type of loan accounts will be eligible: MSME Loans, education loans, housing loans, consumer durable loans, credit card dues, automobile loans, personal loans to professionals and consumption loans

* The credit card outstanding (i.e. settled amount) in the account as on 29.02.2020 will be the reference amount. Any debits/credits, which are not reflected in the account, will not be eligible

*However, loans against fixed deposits [including Foreign Currency Non-Resident (Bank) {(FCNR(B)} account, bonds and other interestbearing instruments], and shares etc., and loans given for investment in financial assets (shares, debentures etc.) are not eligible for coverage under the scheme

*The period for refund, on which the difference between compound interest and simple interest on loan accounts will be calculated, will be from March 1, 2020 to August 31, 2020

*Borrowers will not have to apply to their lending institutions and the compound interest refund will be credited into their bank accounts automatically

*Non-fund based limits will not be included for arriving at the eligibility

*Even partly-disbursed loans will be covered under the scheme

*Borrowers, who have closed their bank accounts between March and August 2020, will also be eligible for a refund, which will be calculated till the date of closing of their accounts

*In case a bank account is closed, the borrower has to inform the bank about the same and give alternative bank account details for crediting money

FOR BANKS

*Banks will assess whether a borrower has aggregate loan facilities of up to Rs 2 crore from the banking system on the basis of information available with them as well as information accessible from credit bureaus

*In case of education loans, housing loans, automobile loans, personal loans to professionals and consumption loans, the rate of interest to be applied for calculating the differential interest component shall be the contracted rate as specified in the loan agreements/ documentation applicable as on February 29, 2020

*For consumer durable loans, the rate of interest to be applied for calculating the differential interest component shall be the contracted rate as specified in the loan agreements/ documentation. In case where no interest is being charged on equated monthly instalments for a specified period, for the purpose of relief, interest may be applied at MCLR/ Base rate as the case may be

*For MSME loans, in case of term or demand loans, the rate of interest for the purpose of calculating the differential will be the contracted rate as specified in the loan agreements/ documentation applicable as on February 29, 2020. For cash credit or overdraft, the rate of interest will be the rate of interest prevailing as on February 29, 2020

* The rate of interest for credit cards for the purpose of refund will be the Weighted Average Lending Rate (WALR) charged by the card issuers for transactions financed on EMI basis from its customers during the period from 1st March 2020 to August 31, 2020