Cabinet authorizes disbursement of additional claims for compound interest relief

The Union Cabinet approved an additional payment of around Rs 973 crore due to ongoing claims for the government’s Compound Interest Relief scheme which reimbursed ‘interest on interest’ charged on small loans up to Rs 2 crore.

The Center has received total claims of Rs 6,473 crore from 238 million borrowers under the “Scheme for granting ex gratia payment of the difference between compound interest and simple interest for six months to borrowers in specified loan accounts (March 3, 2020 to August 31, 2020)” against Rs 5,500 crore estimated as the release earlier. The government had earmarked Rs 5,500 in the 2020-21 Union Budget by extrapolating the share of State Bank of India (SBI) – the programme’s nodal agency – and commercial banks earmarked for small loans.

Under the interest relief scheme, MSMEs, housing, education, durable consumer goods, auto, credit card dues of up to Rs 2 crore were eligible, whether l whether or not the borrower took advantage of the moratorium.

The Center had transferred the entire budget of Rs 5,500 crore to the SBI for reimbursement of compound interest to lending institutions. The SBI has received consolidated claims of approximately Rs 6,473.74 crore from lending institutions, and Cabinet has given approval to disburse the remaining Rs 973.74 crore to the public lender. The lender was expected to settle the claims by November 2021.

Date of submission of the request by SBI Number of lending institutions Number of beneficiaries Amount of claim received Amount disbursed Disbursement pending
03/23/2021 1,019 1406,63,979 4,626.93 4,626.93
23/7/2021 & 22/9/2021 492 499.02.138 1,316.49 873.07 443.42
30/11/2021 379 400,00,000 216.32 0 216.32
Resubmitted by the SBI 101 83,63,963 314 314
1,612 23,89,30,080 6,473.74 5,500.00 973.74

In accordance with the scheme, the amount of relief was to be calculated using the difference between simple interest and compound interest, and the period to be taken into account for the calculation of the ex gratia payment was fixed from March 1, 2020 to August 31, 2020. When calculating the amount, loan account repayments during the period were to be ignored and the interest rate was taken as the loan agreement rate. In the case of credit card fees, the interest rate was to be the weighted average lending rate charged by the card issuer for transactions funded on an EMI basis between March and August.

Infusion of funds

The Cabinet Committee on Economic Affairs (CCEA) has also approved a capital injection of Rs 1,500 crore into Indian Renewable Energy Development Agency Limited (IREDA).

The capital injection will help IREDA to lend an additional Rs 12,000 crore in the renewable energy sector, Information and Broadcasting Minister Anurag Thakur has said. This would help fund approximately 3,500 to 4,000 MW of additional renewable energy capacity.

“This capital injection will contribute to job creation of around 10,200 jobs per year and reduction of CO2 equivalent emissions by around 7.49 million tonnes of CO2/year,” said a government statement. .

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