Express news service
If you had been granted a moratorium on loans or deferred your EMI payments (including credit cards) that were due between March 1, 2020 and August 31, 2020, interest is not waived and will continue to accrue. on the unpaid amount because banks have to pay interest to depositors and retirees.
During the moratorium period, however, interest on interest or compound interest (which the SC calls criminal interest) is completely waived. The banks had already repaid the compound interest paid by borrowers with loans below Rs 2 crore, and now only those with loans above that amount (mainly large industries) remain to be paid.
The repayment or compound interest will be adjusted at the next payable maturity instead of repaying it to the borrower regardless of the loan amount.
Will the regime be applicable to those who have not taken the moratorium?
The government had, in its decision of October 2020, clarified that the regime would apply whether a borrower of the specified category had taken the moratorium in whole, in part or not at all.
Who will bear the cost?
The government has made it clear that it will bear the cost. It is estimated that the program will cost the government Rs 14,000 crore, according to brokerage firm ICRA. While the total cost to the government for low cost loans up to Rs 2 crore was estimated at Rs 6,500 crore, the extended waiver will cost an additional Rs 7,000-7,500 crore.
Will I still have to pay additional interest if I choose the moratorium?
Yes, you will pay more interest if you choose to take advantage of the moratorium. Let’s see how it works.
For example, you had taken out a home loan of Rs 70 lakhs at 9% interest for a period of 20 years from the Union Bank of India. The monthly payment in this case is Rs 64,400.
If you choose to take the moratorium for three months, interest will continue to accrue and amount to Rs 1,58,684. This will be added to your overall liability.
Thus, the total amount payable will be Rs 1,54,58,049. If the moratorium has not been applied, the total amount payable will be Rs 1,51,15,396. While you will pay a higher amount when repaying the IMEs, and on the other hand, if you had not opted for the moratorium, you would end up saving Rs 3,42,653.