Crop, tractor loans ineligible for ex-gratia relief as they fall into Agri allied activity, clarifies FinMin

The Ministry of Finance today clarified that agriculture and allied activity loans will not be eligible for the interest on interest waiver announced by the government last week. It added that crop and tractor loans will not be a part of the eight segments or classes eligible under the scheme as they come under agriculture and allied activities loans. It is to be noted that the government had recently announced the scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months to borrowers in specified loan accounts.

The government had notified that loan accounts with sanctioned limits and outstanding not exceeding Rs 2 crore will be eligible for the scheme and such accounts should be standard in the books of the lending institutions as of the cut-off date of 29 February 2020. The governmnet added that the benchmark rate applicable for such relief would be the contract rate used by the credit card issuers for the purpose of EMI loans. According to the scheme, the ex-gratia relief is to be credited to the account of all eligible borrowers without any requirement to apply.

It is further to be noted that the scheme is also applicable to borrowers who did not avail of the moratorium scheme and continued to pay their EMIs. It is expected that the exchequer will bear a cost of Rs 6,500 crore for rolling out this scheme. 

Meanwhile, in the wake of the coronavirus pandemic and the subsequent disruption leading to the income loss of people, the government and the Reserve bank have brought measures to support borrowers in times of hardship. While the government had announced a loan moratorium, which allowed borrowers not to pay EMIs during the lockdown months and a few months after that, RBI had announced a loan structuring scheme for borrowers after the moratorium period ended. The ex-gratia relief further came as a relief to borrowers.