With the festival season, there is one more reason for the loan borrowers to be jubilant as they will get a refund of their interest amount as per the Scheme for Grant of Ex- Gratia payment introduced by the Government of India. Under this scheme, the banks and the NBFCs have started crediting the differential amount between the compound interest and the simple interest in the loan or bank accounts of the borrowers that have been generated during the moratorium period.

In this blog, we will know about the scheme for the grant of Ex-Gratia payment in detail.

What is an Ex – Gratia Relief Scheme?

Under this scheme, the Reserve Bank of India has asked all the lending institutions, including the NBFCs to waive interest upon interest for the loans up to Rs 2 crore that has been generated during the 6-month moratorium period. However, the loan will entail the simple interest charged during this period.

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Kind of Loans and Borrowers Eligible for the Ex – Gratia Relief Scheme

  • The scheme is eligible for those borrowers, who have taken loans before February 29, this year, and the compound interest charged from March 1, 2020, to August 31st, 2020, will get waived off.
  • Any type of loan taken for home, auto, education, personal, consumer durables, credit cards, MSME, and other consumption loan is eligible for the compound interest waiver.
  • Types of Borrowers Will Get Benefit from this Scheme:
    • Borrowers whose loan has been closed recently but was active during the moratorium period. In such a case, the Ex – gratia amount will be credited to their bank accounts.
    • Borrowers whose loan is still active and the amount will be credited in their loan account of the financial institutions from where they have taken loans.
    • Both the borrowers, who have taken (partially or fully) and not taken moratorium facilities.
  • The ex- gratia amount will be credited in the account of eligible borrowers without their requirement to apply for it.
  • Loan accounts should be standard in the books of the lending institutions as on 29th February 2020.

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Kind of Loans and Borrowers Who Are Not Eligible for the Ex – Gratia Relief Scheme

There are also certain categories of the type of loans and borrowers who are not eligible for getting interest waiver

  • Agriculture and allied activity loans such as crop, tractor loans are not eligible for the waiver
    Loans from unrecognized financial institutions or NBFCs.
  • Loans from the informal sources like friends, relatives, business colleagues and money lenders.
  • Loans against securities and fixed deposits from a recognized bank.
  • Bad borrowers, whose loan has been considered as non-performing assets or they have delinquent on their EMI payments before February 29, 2020.
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Calculations of the Ex-Gratia Amount

It is the differential amount between the Compound Interest and the Simple Interest charged during the moratorium period.

The calculation can be shown as follows:

Compound interest on Principal – Simple Interest on Principal = Ex – Gratia payment

The ex-gratia amount credited in the borrower’s account is very nominal and it will not make a significant difference for the borrowers

The rate of interest will be decided as per the following situations:

  • In respect of term loans/demand loan, the rate of interest for the purpose of calculating the differential will be the contracted rate as specified in the loan agreements/ documentation applicable as on February 29, 2020.
  • The contracted rate/interest rate prevailing as on 29.02.2020 which is considered for calculating the interest differential will exclude any penalties or any penal rate of interest applied in the account.
  • All the over dues charges and other penal interest shall continue to apply on all borrowers as may be applicable.

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Claim Reimbursement by Lending Institutes

  • Lending institutions can lodge their claims for reimbursement latest by 15th Dec 2020 only after crediting amounts.
  • A claim should be pre audited by the statutory auditor of the lending institutions and a certificate in this regard shall be attached to the claim.
  • Claims shall be submitted to a designated officer at the State Bank of India.
  • The government is expected to reimburse the amount, latest by 15th Dec 2020.
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Ex – Gratia Relief Provided by ZipLoan

ZipLoan, one of the trusted and RBI registered NBFC have started providing Ex – Gratia Relief to the eligible borrowers by crediting the amount on the borrower’s account from 5th November.

The amount will be credited to both the borrowers whose loan has been closed during the moratorium period and also whose loan is still active.

ZipLoan provides collateral-free loans up to Rs 7.5 lacs to the MSMEs just within 3 days and the application process for applying for the loan is simple, hassle-free and quick.

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