Banks Given November 5 Deadline To Implement Interest Waiver Scheme

The country's lenders were set a November 5 deadline on Saturday to waive interest payments on coronavirus support loans in a move that could give relief to millions of people ahead of one of the country's biggest festivals.

Prime Minister Narendra Modi's government was forced to rethink the loan moratorium scheme which allowed borrowers to not pay loan instalments between March and August, but allowed lenders to accrue additional interest on the unpaid sum.

An optician from Agra was among the first to challenge the scheme for making borrowers pay additional “interest-on-interest”.

Earlier this month, the government told the Supreme Court it will waive certain interest levies on loans below Rs 2 crore ($272,888) under a health support plan.

The top court had asked the government to implement the scheme, which will bring relief to millions of borrowers, at the earliest.

The government has said lenders have to credit borrowers on or before November 5. Lenders will have to claim reimbursement from the government by December 15.

The scheme will cost the government about Rs 6,500 crore, according to government officials.

The five-day Diwali festival, which starts on November 14, is a time when houses are re-decorated, big-ticket items purchased, feasts held and gifts exchanged.

The court is set to hear the case on November 2.

The government also said that a compensation amount would be given to borrowers with loans up to Rs 2 crore that had not availed the moratorium during the six month period.