Key Points:
- Government will waive ‘interest on interest’ on loans up to Rs. 2 crores.
- The move is made for the benefit of the small businesses.
- The affidavit will impact the fight for the pandemic at a certain level.
- MSME, Education, Housing, Auto, Consumption and Personal and Professional Loans, Credit Card Dues and Consumer Durables are out from paying the Compound Interest.
On Saturday, the government said that it will waive ‘interest on interest’ on loans of up to Rs 2 crore for six months through to the end of August. The Government also warned that this will affect fighting the Coronavirus pandemic.
Retailers and Small Businesses were happier than ever after the government made an announcement in an affidavit to the Supreme Court. Niche businesses have been the hardest hit by the pandemic. But, every coin has two sides and hence, the announcement came with a disclaimer.
The Government told the court that by bearing the cost of paying interest on interest,
“It would naturally impact on numerous other vital commitments being faced by the nation. It includes the meeting direct costs associated with pandemic management, dealing with basic needs of the common man and lessening the common man’s troubles arising out of loss of livelihood.”
In addition, it said that that not all categories of loans are considered fit for waiving off as it would make it difficult for the banks to endure.
The governments will seek the approval of the Parliament and said that the only solution to the problems that are created due to the unprecedented conditions is for the government to bear the burden of waiving of interest. It is also for the ones who have Cleared Dues.
Compound Interest will be discarded for 8 sectors:
- Micro, Small and Medium Enterprises (MSME)
- Education Loans
- Housing Loans
- Auto Loans
- Personal and Professional Loans
- Consumption Loans
- Credit Card Dues
- Consumer Durables
The government has been forced to have a loan in excess of what it had planned on borrowing due to the ongoing pandemic. The entire amount raised hitherto this year has been ₹7.7 trillion or 82% higher than the corresponding period last year, Care Ratings said in a report on 25 September.
