Ex gratia credit on home loans, credit card statements etc

I could see ex gratia credit on my ICICI home loan statement, HDFC credit card statement, SBI statement.


Introduction

• The Top Court, Hon’ble Supreme Court is hearing a batch of petitions that raised issues concerning the six months loan moratorium period announced due to the COVID-19 pandemic.
• The Centre had submitted a affidavit in the Hon’ble Supreme Court stating its intention to waive compound interest charged on loans up to INR 2 crore for six month moratorium period.
• The Hon’ble Supreme Court observed that the Centre decision of interest waiver was a welcome decision by taking plight of the common man, but authorities have not issued any order in this regard.
• The Hon’ble Supreme Court, while posting the matter for hearing on November 2, told the advocates appearing for the Centre and banks that “Diwali is in your hand”.
• Thus, in continuation to its affidavit in Hon’ble Supreme Court, the Centre Government in a festival gift to borrowers, the Finance Ministry has approved guidelines for a grant of scheme of Ex-Gratia Payment of the difference between Compound Interest and Simple Interest for six months for loans upto INR 2 Crores.
  
  
  Eligibility Criteria for Ex-Gratia:
  

• Borrowers in the following segments/loans who have loan accounts with sanctioned limits and outstanding amounts of not exceeding Rs.2 crores [aggregate of all facilities with lending institutions] as on 29th February 2020, shall be eligible under the scheme:
  ➢ MSME Loans
  ➢ Education Loans
  ➢ Housing Loans
  ➢ Consumer Durable Loans
  ➢ Credit Card Dues
  ➢ Automobile Loans
  ➢ Personal Loans to Professional
  ➢ Consumption Loans

• Any Borrower whose aggregate facility with lending institutions is more than INR 2 Crore (Sanctioned Limited or Outstanding amount) will not be eligible for Ex-Gratia payment under this scheme.
  
  Other Terms and Stipulations for Ex-Gratia:
  Account should be standard as on 29th February 2020, i.e. account should not be a NPA as on 29th February 2020.
  • Lending Institution must be a banking company, a Public Sector Bank, Co-operative Bank, Regional Rural Bank or an All Indian Financial Institution, Non-Banking Financial Company, Housing Financial Company or a Housing Finance Company.
  • The Ex-Gratia Payment will be admissible irrespective of whether borrower has opted for Moratorium or not opted for moratorium on repayments during COVID-19 period.
  • The Period to be considered for crediting of difference between compound and simple interest by lending institutions would be from 01st March 2020 to 31st August 2020 (six months/ 184 days). In case of any account being closed during the period, it would be from 01st March 2020 to date of closure.
  • Rate of Interest to be considered would the prevailing rate as on 29th February 2020, i.e. in case of any change in interest rate thereafter, it shall not be considered.
  • Compounding of interest shall be reckoned on monthly basis, except where the contrary is specified.
  • The payable Ex-Gratia amount shall be credited into the account of the eligible borrowers by the lender on or
  before 05th November 2020.
  • Financial Institutions have to lodge their claim for reimbursement by 15.12.20 with designated SBI cell.

Benefits:

1. This scheme provides for ex-gratia payment to specified classes of borrower by way of crediting the difference between the simple interest and compound interest for a period between 01st March 2020 to 31st August 2020 by respective lending institutions.
2. This benefit will be granted to eligible borrowers irrespective of whether such borrowers have fully availed, partially availed or not availed of any moratorium on repayment of respective loans.
   
   Rates of Interest:
   ➢ Education Loan, Housing Loan, Automobile Loan, Personal Loans to Professionals, Consumption
   Loans: Contracted rate as specified in Loan Agreement / Documentation.
   ➢ Consumer Durable Loans: Contracted rate as specified in Loan Agreement / Documentation. In case no
   interest is being charged on EMI for a specified period, for the purpose of ex-gratia payment, interest may be
   applied at lenders base rate / Marginal Cost of Funds based Lending rate (MCLR), whichever is applicable.
   ➢ Credit Card Dues: Weighted Average Lending rate (“WALR”) charged by Card issuer for transactions
   financed on EMI basis from its customers during the period 01st March 2020 to 31st August 2020.
   ➢ MSME Loans: Contracted rate as specified in Loan Agreement / Documentation.
   • Penal Interest or penalty for late payment would not be considered as part of WALR.
   
   Calculations:
   Education Loans, Housing Loans, Consumer Durable Loans, Credit Card Dues, Auto Loans, Personal Loans and Consumption Loan:
   ➢ The Outstanding as on 29th February 2020 will be the reference amount for the Term Loans on which the interest (simple as well as compound) will be calculated.
   ➢ Any repayment in the loan account during the period will be ignored.
   • MSME Loans:
   ➢ For Term Loans – Outstanding as on 29th February 2020 will be the reference amount for Terms Loans on which the interest (simple as well as compound) will be calculated. Repayments during the period to be ignored.
   ➢ For Cash Credits / Overdraft Facilities – Simple Interest will be calculated on daily product basis (i.e. on daily outstanding as at end of the day) at the rate as on 29th February 2020. Compound interest will be calculated for the period at the rate of interest as on 29th February 2020 and compounding will be done on monthly rests.