The government has announced guidelines for the waiver of compound interest that was payable by borrowers on their loan equated monthly instalments (EMI) between March 1, 2020 and August 31,2020.
Total Compound Interest Payment (Principal + Interest)
Total Simple Interest Payment (Principal + Interest)
Your earnings
CRITERIA FOR WAIVER OF INTEREST ON INTEREST
Following are the criteria to be eligible for the scheme :
How the scheme works?
Normally, the interest is calculated using a compounding formula, which means you pay interest on accrued interest as well. However, under the waiver scheme, a borrower is required to pay simple interest instead of compound interest on the outstanding loan amount during the moratorium period which means a lower interest burden on the borrower.
The difference between the compound interest and simple interest will be borne by government.
Given below is the example of much amount will be wavied off due to this scheme :
| Outstanding Loan Amount at Beginning of Moratoriam | 10 Lakhs | 25 Lakhs | 35 Lakhs |
| Interest Rate | 7.50% | 7.50% | 7.50% |
| Compound Interrest Calculation(A) | 38090.67 | 95227.50 | 133317.50 |
| Simple Interest Calculations(B) | 37500.00 | 93750.00 | 131250.00 |
| Net Savings(C) = (A-B) | 590.67 | 1477.50 | 2067.50 |
| % Savings(C/A*100) | 1.55 | 1.55 | 1.55 |
No separate application process required to fill by the borrower
By 5th Nov 2020 you will get the benefit from your bank