State Bank of India to get Rs 974 cr for 'interest on interest' payment

The cabinet committee on economic affairs (CCEA) has also approved an equity infusion of Rs 1,500 crore in IREDA

The Union Cabinet on Wed­nesday approved an addit­ional payment of about Rs 973 crore on account of pending claims for government’s compound interest waiver scheme that reimbursed ‘interest-on-interest’ charged on small ticket loans of up to Rs 2 crore.

The Centre had received total claims of Rs 6,473 crore from 238 million borrowers under the “scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts (between March 3, 2020 to August 31, 2020)”, against an estimated Rs 5,500 crore. The government had also made provision of Rs 5,500 in the Union Budget 2020-21 by extrapolating the share of State Bank of India (SBI) — the nodal agency for the scheme — and scheduled commercial banks for the same.

Under the scheme, micro, small & medium enterprises (MSME), housing, education, consumer durables, auto, and credit card dues of up to Rs 2 crore were eligible, irrespective of whether the borrower had availed a moratorium or not.

The Centre had transferred the entire budgeted Rs 5,500 crore to SBI for reimbursement to lending institutions. The SBI has received consolidated claims of about Rs 6,473.74 crore from lending institutions, and the Cabinet has now granted approval to disburse the remaining Rs 973.74 crore to the state-owned lender. The lender had to settle claims by November 2021.

Under the scheme, while calculating the amount, repayments in the loan account during the period had to be ignored, and the rate of interest was reckoned as the rate in the loan agreement. In the case of credit card dues, the rate of interest had to be the weighted average lending rate charged by the card issuer for transactions financed on an equal monthly instalment (EMI) basis between March and August.

Fund infusion

The cabinet committee on economic affairs (CCEA) has also approved an equity infusion of Rs 1,500 crore in Indian renewable energy development agency limited (IREDA).

The equity infusion will help the IREDA to lend an additional Rs 12,000 crore in the renewable energy sector, information and broadcasting minister, Anurag Thakur, said. This would help in funding an additional capacity of approximately 3,500-4,000 megawatts of renewable energy.

“This equity infusion will help in creating around 10,200 jobs per year and also reduce carbon-dioxide (CO2) equivalent emissions of approximately 7.49 million tonnes a year,” a government statement said.