Huge relief for home loan borrowers if govt bears part of compound interest

The increase in EMI or tenure will be lesser if the government pays the compound interest

If the government decides to take on the burden of compound interest upon itself, the savings to a home loan borrower could be substantial. The extra interest accumulated over five months on a loan of Rs 50 lakh, on which the interest rate is 8.5 per cent and tenure is 20 years, could range from Rs 75,973 to Rs 1,76,514, depending on where the borrower stands in his loan tenure. Depending on the exact formula that the government adopts for its loan waiver scheme (which is yet to be revealed), the benefit will be a fraction of these number.