Many of us need financial help, like loans, to ease the stress of financial challenges. The COVID-19 pandemic has intensified this need, as people are dealing with money problems, facing pay cuts, or losing their jobs. Business owners, too, are seeking financial aid like MSME loans but are wary of the high-interest rates, especially when business is slow.
To help with these financial pressures, India’s Finance Ministry recently introduced new guidelines that include an interest rate waiver on loans. As part of the RBI’s moratorium scheme, a waiver is available for loans taken over six months. Borrowers are entitled to an ex-gratia payment that covers the difference between simple and compound interest on loans up to Rs 2 crore.
Here’s what the scheme offers:
Typically, loan interest is calculated using compound interest, meaning you pay interest on the interest that accumulates. With this scheme, you only need to pay simple interest, which reduces your repayment burden. It applies to various types of loans, such as MSME loans, education loans, housing loans, consumption loans, and consumer durable loans. This waiver is especially helpful for employers with MSME loans since high-interest rates could hurt businesses during the pandemic.
Banks and other lending institutions are required to credit borrowers with the difference between simple and compound interest, regardless of whether they fully or partially used the moratorium. They can claim reimbursement for the credited amount from the Central Government of India. The waived interest should be deposited by November 5, 2020.
Eligibility for the Scheme:
You can benefit from this scheme for loans taken between March 1 and August 31, 2020. If your loan accounts, by February 29, have a sanctioned limit and outstanding repayments of no more than Rs 2 crore across all facilities provided by lending institutions, you’re eligible. Also, accounts must be standard, not classified as Non-Performing Assets (NPA), and institutions must be public sector banks, cooperative banks, housing finance companies, non-banking financial entities, or all-India financial institutions.
This waiver applies to those who have continued their loan repayments and haven’t used the moratorium scheme, so even if you didn’t utilize the moratorium, you can receive the waived interest in your loan account.
Conclusion:
Amid the COVID-19 outbreak and the festive season, this interest waiver on loans during the moratorium period is a supportive gesture by the Indian government. For example, if you have taken an MSME loan, you no longer need to stress about the high-interest rates. It’s understandable to feel cautious about taking out loans in tough times, but these schemes offer relief, making it easier for businesses in the MSME sector to secure loans confidently.
If you’re considering a business loan, Bajaj Allianz offers options like their Business Loan on Finserv MARKETS. You can explore the MSME Business Loan, which provides up to Rs 30 lakh at low-interest rates. Aspiring entrepreneurs might also look into their Startups Loan, available without collateral and with flexible repayment terms ranging from 12 to 60 months.
