Loans against FDs, bonds, shares out of Nirmala Sitharaman's relief plan

For payment to credit card holders, the relief will be calculated using the interest rate charged by the bank for converting outstandings into EMIs and not the rate charged to those who revolve their balances.

Loans against fixed deposits, bonds and shares will not be eligible for relief under the government scheme for an ‘ex gratia’ payment to borrowers of up to Rs 2 crore. However, in the case of credit card dues, the government has clarified that the outstanding as on February 29 will be eligible for relief.

The government on Tuesday released FAQs (frequently asked questions) on its scheme to provide ex gratia payment for the difference between simple and compound interest for borrowers of up to Rs 2 crore. This is available for the period of moratorium (March 1 to August 31, 2020) announced by the RBI. The FAQs clarify that for calculating the Rs 2-crore loan amount limit, banks will take into account all borrowings and not just a single loan.

While the moratorium relief was available for only those borrowers who did not have any overdue payments, the government’s ex gratia payment is available to even special mention accounts — or those that have overdues for less than 90 days, but are not non-performing assets. For payment to credit card holders, the relief will be calculated using the interest rate charged by the bank for converting outstandings into EMIs and not the rate charged to those who revolve their balances. According to bankers, loans against securities are not eligible as these are used by traders to take leveraged positions in the market.


The relief will be available on MSME loans, and loans for education, housing, consumer durables and automobiles. Other consumption loans — including personal loans, credit card dues and loans to professionals — are also covered.

The FAQs state that lenders will assess the total loan outstanding of a borrower based on information available with them as well as the information that is accessible from credit information bureaus. What this means is that if a borrower has a home loan of Rs 1.5 crore, an education loan of Rs 50 lakh and an auto loan of Rs 10 lakh, his total borrowing will be reckoned to be over Rs 2 crore from the banking system.

In respect of education loans, housing loans, automobile loans, personal loans to professionals and consumer loans, the rate of interest to be applied for calculating the differential interest component shall be the contracted rate as specified in loan agreements documentation applicable as on February 29, 2020. In case where no interest is being charged on equated monthly instalments for a specified period, for relief, interest may be applied at MCLR/ base rate as the case may be.
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