This October, the Supreme Court has ordered the Indian banks to provide the moratorium interest relief facility to their existing borrowers. This declaration has relieved the small borrowers. The pandemic and lockdown situations have already made it difficult for them to earn and survive. However, being a borrower you need to know the A to Z of this interest waiver.
What Did The Moratorium Period Offer?
When our country started dealing with this pandemic, the RBI declared a moratorium period for the borrowers from 1st March to 31st August of this year. During this period, borrowers had the freedom to skip the regular EMI payments. But that never meant that they don’t have to pay that accumulated amount after the moratorium gets over. However, the RBI also mentioned that this won’t have any negative impact on the borrowers’ credit history.
What Does The Moratorium Interest Relief Facility Offer?
Banks charge compound interest rates on the loans that can differ from one another. It means a borrower pays interest on the interest paid. Now, as per the moratorium interest relief facility declared by the Honorable Supreme Court, banks have to return the differential amount between the compound interest and simple interest to the borrowers. Thus the facility offers a reduction on the EMIs as borrowers will get the amount back for those six months into their respective loan accounts. However, there are still some vital factors on which your eligibility is dependent.
What Should Be The Upper Limit Of The Existing Loans?
Your existing loan amount should be 2 crores or less than that to avail of the moratorium interest relief facility. No matter how many loans you have, your total borrowings should not cross the 2 crore limit, otherwise, you won’t get any cashback.
Which Loans Are Eligible For The Relief?
Several loan types that are eligible for this facility are as follows.
• Housing Loans
• Educational Loans
• MSME Loans
• Consumer Durable Loans
• Consumption Loans
• Automobile Loans
• Personal Loans for Professionals
• Credit Card Loans
However, you won’t be eligible to get the facility for your credit card if you have overdue against the card.
Which Loans Are Not Eligible For The Facility?
Apart from the aggregated loan amount exceeding 2 crores, the following factors can make you inapplicable for the moratorium interest relief facility.
• Loans against fixed deposits, bonds, shares, securities, gold, or any property.
• Loans for buying tractors.
• Agricultural Loans.
• Non-performing assets or NPAs.
How Will The Relief Amount Be Determined?
The calculation of the moratorium interest relief amount is very simple. For example, if you have a loan of Rs. 1 lakh that charges 9% interest per annum. The compound and simple interests for six months will be Rs. 4,586/- and Rs. 4500/- respectively. It means the lender will credit Rs. 86/- to your loan account.
The lender will calculate the amount as per the interest rate was on 29th February 2020. If any of your loan accounts closed during the moratorium period, then you will get the differential amount calculating from 1st March 2020 till the date of closure.
What Is The Application Procedure?
Well, you don’t have to apply to get the moratorium interest relief amount. Banks will directly credit the amount to the personal loan account or savings or current account.
It is certainly a beneficial initiative as the common people including the small industrialists get relief from the overburden of loan repayment amidst the worldwide crisis.