{"id":6767,"date":"2020-12-17T05:43:05","date_gmt":"2020-12-17T05:43:05","guid":{"rendered":"https:\/\/kredx.com\/blog\/?p=6767"},"modified":"2023-12-26T12:06:29","modified_gmt":"2023-12-26T12:06:29","slug":"everything-businesses-need-to-know-about-interest-waiver-for-a-moratorium-by-the-government","status":"publish","type":"post","link":"https:\/\/www.kredx.com\/blog\/everything-businesses-need-to-know-about-interest-waiver-for-a-moratorium-by-the-government\/","title":{"rendered":"Everything Businesses Need To Know About Interest Waiver For A Moratorium By The Government"},"content":{"rendered":"

To deal with the damaging effects of the ongoing economic crisis, the government has undertaken several initiatives to aid businesses in finding their footing. Among these, one of the most crucial steps has been granting an interest waiver to eligible businesses.\u00a0<\/span><\/p>\n

Borrowers with existing loans of up to Rs. 2 crores are eligible for an interest waiver, as per a directive by the Finance Ministry. This scheme was implemented to benefit individuals who were adversely affected due to the current Covid-19 pandemic. On 14 October 2020, the Supreme Court ordered this interest waiver for individual borrowers, as well as, businesses.<\/span><\/p>\n

What Does This Interest Waiver For A Moratorium Mean?<\/b><\/h2>\n

To appreciate this recent interest waiver, you first need to know the six-month moratorium period that preceded it. As per the earlier moratorium, borrowers were provided with a reprieve from having to bear interest payment, and principal repayment for their existing loans after the nationwide lockdown started in March 2020.<\/span><\/p>\n

During this time, businesses with outstanding loans could get away without paying monthly installments. Nevertheless, interest continued to accrue on the principal outstanding portion in these months. Moreover, this moratorium did not mean that companies could avoid liabilities for six months. Instead, the loan tenure was extended by six months to ensure a complete repayment.<\/span><\/p>\n

However, availing of this moratorium period was optional. Companies that could afford to make regular EMI payments had the chance to avoid additional interest accrual by opting out of this moratorium scheme.<\/span><\/p>\n

Interest Waiver Affidavit: What Does It State?<\/b><\/h2>\n

Besides the EMI moratorium on loans, the Indian government also brought in some interest reprieve for borrowers with its October directive. To appreciate this <\/span>interest waiver for a moratorium, you should first assess how loan repayments normally work.<\/span><\/p>\n

Indian lenders calculate interest on term loans using the compound interest method. This compounded interest would mean businesses that took advantage of the earlier EMI moratorium would need to service higher EMIs. Such a thing would happen because of the continued accrual of interest, even during the moratorium months.<\/span><\/p>\n

To ensure that borrowers do not have to bear higher installments at the end of the moratorium, the Finance Ministry implemented this new directive. Under this scheme, businesses and individual borrowers would only need to service interest using simple interest calculations.\u00a0<\/span><\/p>\n

Who Are Eligible To Avail Benefits Under This Interest Waiver Scheme?<\/b><\/h2>\n

The following businesses are eligible to enjoy benefits under the <\/span>interest waiver for a moratorium directive.<\/span><\/p>\n