The Centre is looking to reward timely EMI (equated monthly installment) payers by waiving compound interest (on EMIs) of loans valued at up to Rs 2 crore and may make a formal announcement regarding this before Diwali.
The benefit may be extended to all types of loans, comprising home mortgages, and to debtors/borrowers who paid their EMIs during the moratorium period.
The government is also currently working on the plan to waive interest on interest during the moratorium period between March 1 and August 31.
"There should not be any sector-specific discrimination. It is not prudent to exempt interest on interest for personal loans only and deny the same for home loans. It will be extended to all those who have taken loans up to Rs 2 crore, which is a reasonable limit," a government source told the Hindustan Times.
The Reserve Bank of India (RBI) had on March 27 announced a three-month moratorium on term loans from March 1 to help borrowers surmount the economic repercussions of the coronavirus pandemic. The central bank then on May 22 extended the (moratorium) period by another three months until August 31, 2020.
The source further told the publication that the "compound interest exemption during the moratorium period will be equally available to all borrowers", including those who availed the six-month moratorium as well as the ones who continued paying their EMIs even during the six-month period.
The Centre has assured the Supreme Court (SC) that it will waive the "interest on interest" during the six-month moratorium period for loans of up to Rs 2 lakh crore although the move will have significant financial consequences.