Union Cabinet on Wednesday has approved the payment of Rs 973.74 crore ex-gratia for ‘interest on interest’ to lending institutions charged during pandemic. “The Union Cabinet chaired by Hon’ble Prime Minister Shri Narendra Modi has approved the payment of ex-gratia amount of Rs. 973.74 crore pertaining to remaining claims submitted by Lending Institutions (LIs) under 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 official statement mentioned.
Earlier finance ministry asked the banks to share details of the refunds or adjustment of ‘interest on interest’ charged to borrowers during the moratorium period March to August 2020. In the wake of coronavirus pandemic, the Reserve Bank of India had announced a loan moratorium scheme to help the borrowers affected by the never-seen-before incident. The moratorium was applicable for the payment of instalments due between March and August, 2020. The category of borrowers that were eligible for ex-gratia payment under the scheme: 1) MSME loans up to Rs 2 crore, 2) Education loans up to Rs 2 crore, 3) Housing loans up to Rs 2 crore, 4) Consumer durable loans up to Rs 2 crore, 5) Credit card dues up to Rs 2 crore, 6) Auto loans up to Rs 2 crore, 7) Personal loans to professionals up to Rs 2 crore, 8) Consumption loans up to Rs 2 crore.
Later, the Supreme Court rejected to extend moratorium beyound August 31, 2020. The lending institutions were asked to disclosed the aggregate amount to be refunded or adjusted during moratorium in their financial statements for the year ending, March 31, 2021.
By granting ex-gratia payment of difference between compound interest and simple interest during the six month moratorium period to distressed/vulnerable category of borrowers, irrespective of whether the borrower had availed of moratorium or not, the scheme would equitably help small borrowers bear the stress on account of the pandemic and get back on their feet.
The ex-gratia payment aimed at helping both the bank and small borrowers. “By granting ex-gratia payment of difference between compound interest and simple interest during the six month moratorium period to distressed/vulnerable category of borrowers, irrespective of whether the borrower had availed of moratorium or not, the scheme would equitably help small borrowers bear the stress on account of the pandemic and get back on their feet,” a statement by the Cabinet said.
“Budget allocation of Rs 5,500 crore was made for the scheme in FY 2020-2021. Whole amount of Rs 5,500 crore, as approved by the Cabinet, has been disbursed to SBI, the nodal agency under the scheme, for consequent reimbursement to lending institutions,” it further mentioned.
The estimated amount of Rs 5,500 crore was calculated by extrapolating the share of SBI and Scheduled Commercial Banks for the aforementioned category of loans. It was also apprised to the Cabinet that the actual amount would be known once individual lending institutions submit their pre-audited account-wise claims.
“Now, SBI has informed that it has received consolidated claims of Rs 6,473.74 crore approx from lending institutions. As Rs. 5,500 crore has already been disbursed to SBI, approval of the Cabinet is now being sought for balance amount of Rs 973.74 crore,” the Cabinet statement added.
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