The Centre’s affidavit in the Supreme Court, which said that it would waive off interest on loans upto ₹2 crore that had taken the moratorium, would impact at least 30 per cent of such loans with banks and NBFCs.

For borrowers, it could amount to monetary relief of up to ₹80,000 for loans of ₹2 crore, experts said.

According to Gaurav Gupta, CEO, MyLoanCare.in, such a move could impact possibly over 80 per cent of the loans under moratorium in terms of volume; but in terms of value, it would be probably less than 25 per cent.

“The reply essentially provides for the government to pay the interest on interest portion as opposed to the same being charged for the lockdown period from eligible category of borrowers. Typically for a home loan of ₹50 lakh, the monetary amount of waiver will stand at approximately ₹20,000. Similarly, for a personal loan of ₹5 lakh, the potential benefit to the customer may be around ₹2,500,” he said.

Most bankers remained tight-lipped about the move and said they would await further details.

“The fact that the government is likely to bear the cost will be positive for banks. But the hows and whys still have to be worked out,” noted a bank executive, adding that in terms of value, these will account for about a quarter of the loans under moratorium.

“Assuming not more than 30-40 per cent of the overall loans of the banks and NBFCs will be eligible for relief, the cost to the government should not exceed ₹5,000 crore-7,000 crore. This is assuming all borrowers are given relief irrespective of whether they availed the moratorium or not,” said Anil Gupta, Vice-President, ICRA Ltd.

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Modalities to be worked out

Experts have also said that it is yet to be seen how the process will be worked out, and if all accounts are benefitted or only those under moratorium.

Gaurav Gupta pointed out that there are some unanswered questions that may get cleared in due course, such as the process and timeline ,and how the benefit will be applied to customer accounts that have already been debited for this amount.

Further, what happens to an account which has been since been closed or the loan fully re-paid, remains to be seen.

The Centre has informed the Supreme Court that loans up to ₹2 crore taken by individuals and MSMEs will be eligible for waiver of compound interest during the six-month moratorium period between March and August 2020.