New Delhi, October 25: With the onset of the upcoming festive season, the government announced a major relief to borrowers. The Modi government on Friday announced waiver of interest on interest for loans up to Rs 2 crore irrespective of whether moratorium was availed or not. Reports inform that the Department of Financial Services came out with operational guidelines in the backdrop of Supreme Court's direction to implement the interest waiver scheme. The scheme is likely to cost the exchequer Rs 6,500 crore.

MSME loans, housing loan, education loans, credit card dues, auto loans, consumer durable loans and consumption loans are covered under the scheme. Talking about the eligibility criteria mentioned in the guidelines, the accounts should be standard as on February 29 which means that it should not be Non-Performing Asset (NPA).

On October 14, the top Court had directed the Centre to implement the interest waiver on loans of up to Rs 2 crore  under the RBI moratorium scheme ‘as soon as possible’ in view of the COVID-19 pandemic. The top Court said that the common man's Diwali is in the hands of the government. As per the guidelines, the scheme can be availed by borrowers in specified loan accounts for a period from March 1 to August 31, 2020. "Borrowers who have loan accounts having sanctioned limits and outstanding amount of not exceeding Rs 2 crore (aggregate of all facilities with lending institutions) as on February 29 shall be eligible for the scheme," it said.

As per the scheme, the lending institutions shall credit the difference between compound interest and simple interest with regard to the eligible borrowers in respective accounts for the said period irrespective of whether the borrower fully or partially availed the moratorium on repayment of loan announced by the RBI on March 27, 2020. The scheme is also applicable on those who have not availed the moratorium scheme and continued with the repayment of loans.

The lending institutions after crediting the amount will claim the reimbursement from the central government. Hearing the matter on October 14, the Supreme Court observed that it was concerned about how the benefit of interest waiver would be given to borrowers and said the Centre has taken a "welcome decision" by taking note of plight of the common man, but authorities have not issued any order in this regard.

A bench headed by Justice Ashok Bhushan had said that ‘Something concrete has to be done’ adding that the benefits of waivers to borrowers up to Rs 2 crore must be implemented as soon as possible. The top court, which posted the matter for hearing on November 2, told the advocates appearing for the Centre and banks that "Diwali is in your hand".

The Centre recently told the apex court that going any further than the fiscal policy decisions already taken, such as waiver of compound interest charged on loans of up to Rs 2 crore for six months moratorium period, may be "detrimental" to the overall economic scenario, the national economy and banks may not take "inevitable financial constraints". The top court is hearing a batch of petitions which have raised issues concerning the six-month loan moratorium period announced due to the COVID-19 pandemic.