Centre to waive compound interest on loans up to Rs 2 cr for 6 months

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New Delhi (NVI): The Centre has decided to waive compound interest on loans of up to Rs 2 crore for a six-month moratorium period. The Centre agreed to waive compound interest (interest on interest) in the Supreme Court due to the coronavirus pandemic.

The Centre also said it will seek due authorisation from Parliament for making appropriate grants.

“The endeavour shall be over and above the support of Rs 3.7 lakh crore to MSMEs, Rs 70,000 crore for home loans etc. already extended through the Garib Kalyan and Aatma Nirbhar packages announced by the government earlier,” it said.

The Union Finance Ministry also filed an affidavit on behalf of the Union of India. It said that the relief to all borrowers in respect of compounding of interest during the period of moratorium would be admissible to the categories specified irrespective of whether the borrowers had availed the moratorium or not.

“The government, therefore, has decided that the relief on waiver of compound interest during the six-month moratorium period shall be limited to the most vulnerable category of borrowers. This category of borrowers, in whose case, the compounding of interest will be waived, would be MSME loans and personal loans of up to Rs 2 crore,” it said.

The loans were categorised into eight categories by the government including MSME (Micro, Small and Medium Enterprises), education, housing, consumer durable, credit card dues, auto, personal, and consumption.

It further said that any individual/entity whose loan amount is more than Rs 2 crore will not be eligible for waiver of the compounding of interest.

The Supreme Court last week directed the Centre to come up with a concrete plan to help borrowers.