Finance Ministry issues guidelines for implementation of interest waiver on loan

Most of us require financial assistance like loans in order to relieve ourselves from the burden on our shoulders. In light of the given pandemic due to Covid-19, many have been facing a crisis in regard to the financial flow. The economy has been in bad shape and citizens are either facing pay cuts or loss of their jobs. Many business owners require financial assistance like MSME loan yet are afraid of the MSME loan interest rate amidst the slow business.

To ease the financial strain, India’s Finance Ministry recently approved of new guidelines that implement a waiver of the interest rates on loans. Under the moratorium scheme by the RBI, there is an interest waiver for loans borrowed for six months. According to the guidelines of the scheme, there is a grant of optional (ex-gratia) payment of the difference between simple interest and compound interest of a loan taken to a maximum of Rs 2 crore.

Guidelines of the scheme:

Generally, the interest rate of a loan is calculated using a formula of compounding, which needs you to pay for the interest on the accrued interest too. However, with the given scheme, you only need to pay for the simple interest and not for the compound interest. This aids in lowering your burden while repaying the loan.

  • The scheme covers various types of loans like MSME loan, education loans, housing loan, consumption loans, and consumer durable loan. This is a great advantage to all the borrowers who have taken loans under these categories as their compound interests are completely waived. This makes it much easier for many, especially the employers who have taken MSME loan as the MSME loan interest rate during the pandemic could only hinder the business.
  • Lending institutions (like banks) are supposed to credit the respective borrower’s account that is eligible with the difference of simple interest and compound interest irrespective to the borrower availing the moratorium partially or fully while repaying the loan.
  • Lending institutions shall lay claim to the reimbursement of the credited amount to borrowers out of the central government of India.
  • It is stated that the waived interest amount is required to be credited by the lending institution by the 5th of November, 2020.

Eligibility Criteria:

  • For the period of six months loan moratorium, you can utilize this scheme starting from 1st March upto 31st August, 2020. That is, if you have taken a loan anytime between those six months, you are eligible for the said scheme.
  • If you have loan accounts with sanctioned limits and an outstanding loan repayment amount that does not exceed Rs 2 crore combining every facility of the lending institutions as of 29th February, then you are eligible for this scheme.
  • As on 29th of February, the accounts require to be standard and not NPA (Non-Performing Asset).
  • The lending institutions require to be either a public sector bank, banking company, regional rural bank or cooperative bank, Housing Finance Company, Non-Banking Financial Company, All India Financial Institution.
  • This scheme is applicable to all those who have continued repaying the loans and haven’t made use of the moratorium scheme. Thus, even if you have not utilized the moratorium scheme, you are still eligible for the waiver of interest and shall expect the amount credited into your respective loan accounts by your lending institution.


In the wake of the given outbreak of coronavirus and oncoming season of festivities, this scheme to waive the interests of the loan taken during the period of moratorium scheme within the given six months is a gesture of good faith by the government of India. For instance, if you have taken a MSME loan, now you do not have to worry about those MSME loan interest rate.

It is understandable why you can be quite hesitant to apply for loans during such harsh times. However, with such schemes to aid in easing your financial burden and repayment, businesses in the MSME sector can once again take loan unhesitatingly.

In case you are looking for any type of business loan, check out Bajaj Allianz Business Loan, available on Finserv MARKETS. You can also check out the MSME Business Loan that offers a loan amount as much as Rs 30 lakh at low-interest rates. Aspiring entrepreneurs can also check out their Startups Loan that requires zero collateral to apply and has a flexible tenure repayment that ranges from 12 to 60 months.

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