Loan Moratorium Waiver Benefit by Govt

There is good news for those loan borrowers who didn’t opt for the loan moratorium benefit which was introduced by govt due to the pandemic. The govt has decided to pay the interest on the interest of the loan outstanding and pass on the benefit in form of cashback to loan borrowers.

Let me explain

So those borrowers who have opted for loan moratorium benefit will only be paying the simple interest on the loan outstanding and not the interest on the interest. This means that all those who paid their EMI’s are in a way getting penalized for not taking the benefit. Hence govt has with this benefit where all those loan takers who have paid their EMI’s on time will also be just paying the interest on their loan outstanding and not the compound interest for the period of 6 months (from Mar 1 to 31st Aug 2020)

Note that the interest applicable for calculation purpose will be as on 29/02/2020.

However because the EMI payments have already been made, the govt will pay back the difference to your bank account in form of a cashback in a few days. Let me summarize it

  • What you have to pay : Only the simple interest on the loan outstanding as of 29th Feb, 2020
  • What you paid : Compound Interest on the loan outstanding as of 29th Feb, 2020
  • What you will get back : Difference between Compound and Simple Interest for 6 months

Example Calculation

Here is a sample calculation for a loan outstanding of Rs 50 lacs (as of Feb 29,2020) with an interest rate of @9%

Simple Interest = 50,00,000 * 9% * 6/12 = 2,25,000

Compound Interest = 5000000*((1+9%/12)^(12*0.5) -1) = 2,29,261

Difference = 2,29,261 – 2,25,000 = Rs 4,261

So you will get back this amount in form of cashback

This benefit is available on 

  1. Housing Loans
  2. Automobiles Loans
  3. Credit Card Debt
  4. Education Loans
  5. Consumer Durable Loans
  6. MSME Loans

Other Eligibility Criteria to get this benefit

  • The Loan Outstanding should be up to Rs 2 crore
  • The Loans should not be NPA as on 29/2/2020

This benefit will also be passed to someone whose loan is closed during the moratorium period. Do let me know if you have any questions on this and I will be able to answer that.

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