The Reserve Bank of India (RBI) on Tuesday directed commercial lenders to pay the difference of compound interest and simple interest for six months to borrowers to help them tide over the coronavirus pandemic. The development comes days after the government set a November 5 deadline for banks to waive interest payments on coronavirus support loans on the onset of festive season.
According to the government's scheme, lenders will credit the amount into the borrowers' accounts on or before November 5, which lenders claim as reimbursement from the Centre by December 15.
The scheme mentions an "ex-gratia" amount that would be given to borrowers with loans up to Rs 2 crore who had not availed the moratorium during the six-month period.
It mandates the payment to certain categories of borrowers by way of crediting the difference between simple interest and compound interest for the period from March 1 to August 31 by respective lending institutions.
Earlier this month, the government told the Supreme Court it will waive certain interest levies on loans below Rs 2 crore. The court had then asked the government to implement the scheme, which will bring relief to millions of borrowers, at the earliest.
The government was forced to rethink the loan moratorium scheme which allowed borrowers to not pay loan instalments between March and August, but allowed lenders to accrue additional interest on the unpaid sum.
The scheme will cost the Centre about Rs 6,500 crore, news agency Reuters reported quoting government officials.
The court is set to hear the case on November 2.