Due to the ongoing pandemic, the government had offered temporary relief for loan borrowers. They could opt to stop paying loan EMIs from March till August. The temporary period during which borrowers could stop paying loan EMIs without it being declared as a loan default is known as moratorium.
However, what many borrowers weren’t aware of was that during the moratorium period they had to pay interest on interest, also known as compound interest. The interest payments for ongoing loans during the moratorium period continued to incur interest. The interest due every month during moratorium was added to the loan amount, thus increasing the burden of the borrower after the moratorium.
However, recently it was announced that the borrowers will be offered relief from the extra interest incurred by their loan accounts during the moratorium. This relief was offered in the form of ex-gratia payment, which is the difference between simple and compound interest during the moratorium.
Eligible borrowers do not have to apply separately to claim the ex-gratia benefits. The appropriate amount was added directly to the loan accounts of eligible borrowers.
Additional Reading: Considering A Loan Moratorium Make Sure To Check Other Alternatives First