Interest waiver: Borrowers may get monetary relief of up to Rs 80,000 for loans

The Centre's affidavit in the Supreme Court that it would waive off interest on loans up to Rs 2 crore that had taken the moratorium would impact at least 30 per cent of such loans with banks and NBFCs.

For borrowers, it could amount to monetary relief of up to Rs 80,000 for loans of Rs 2 crore, experts said.

According to Gaurav Gupta, CEO, MyLoanCare.in, such a move could impact possibly over 80 per cent of the loans under moratorium in terms of volume, but in terms of value, it would be probably less than 25 per cent.

"The reply essentially provides for the government to pay the interest on interest portion as opposed to the same being charged for the lockdown period from the eligible category of borrowers. Typically for a home loan of Rs 50 lakh, the monetary amount of waiver will stand at approximately Rs 20,000. Similarly, for a personal loan of Rs 5 lakh, the potential benefit to the customer may be around Rs 2,500," he said.

Most bankers remained tight-lipped about the move and said they would await further details.

"The fact that the government is likely to bear the cost will be positive to banks. But the hows and whys still have to be worked out," noted a bank executive, adding that in terms of value, these will account for about a quarter of the loans under moratorium.

"Assuming not more than 30 per cent to 40 per cent of the overall loans of the banks and NBFCs will be eligible for relief, the cost to the government should not exceed Rs 5,000 crore to 7,000 crore. This is assuming all borrowers are given relief irrespective of whether they availed the moratorium or not," said Anil Gupta, Vice President, ICRA Ltd.

Modalities to be worked out:

Experts have also said that it is yet to be seen how the process is worked out and if all accounts are benefitted or only those under moratorium.

Gaurav Gupta pointed out that there are some unanswered questions that may get cleared in due course such as the process and timeline and how the benefit will be applied to customer accounts that have already been debited for this amount.

Further, what happens to an account which has been since been closed or the loan fully re-paid.

"To bring in parity between the borrower who availed moratorium and one who didn't, a notional amount of interest on interest will need to be reduced from the principal amount outstanding against the borrower who didn't availed moratorium," Anil Gupta further said.

The Centre has informed the Supreme Court that loans up to ₹2 crore taken by individuals and Micro, Small and Medium Enterprises (MSMEs) will be eligible for the waiver of compound interest during the six-month moratorium period between March and August 2020.

It listed eight categories of loans for waiver of compound interest including MSME loans up to ₹2 crore, education loans up to ₹2 crore, housing loan up to ₹2 crore, consumer durable loans up to ₹2 crore, credit card dues up to ₹2 crore, auto loans up to ₹2 crore, personal loans to professionals up to ₹2 crore and consumption loans up to ₹2 crore.

COMMENT NOW