Kolkata: Thousands of clients of NBFC- MFIs will benefit from the scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months to certain categories of borrowers, an official said on Thursday. Roughly, around Rs 300 crore will flow in as a relief to the MFI borrowers due to the order on an aggregate loan of Rs 60,000 crore, Microfinance Institutions Network (MFIN) CEO Alok Misra said.
The Reserve Bank had on Tuesday asked all lending institutions, including non-banking financial companies, to implement the waiver of interest on interest for loans up to Rs 2 crore for the six-month moratorium period beginning March 1, 2020.
On October 23, the government had announced the scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months to borrowers in specified loan accounts.
The government had asked the lending institutions to complete the exercise of crediting the amount in the accounts of borrowers by November 5.
Misra said the money will not be given directly in the form of cash to the clients, it will be adjusted in their accounts.
According to him, this benefit to the MFI borrowers will be for those whose accounts were standard at the beginning of the moratorium period.
Misra said the number of defaulters of MFI loans is very low as the recovery rate is as high as 98 per cent.
The finance ministry had issued the operational guidelines for the scheme in the backdrop of the Supreme Court’s direction to implement the interest waiver scheme.
The apex court on October 14, directed the Centre to implement “as soon as possible” interest waiver on loans of up to Rs 2 crore under the RBI moratorium scheme in view of the COVID-19 pandemic, saying the common man’s Diwali is in the government’s hands.
Talking about the microfinance sector at present, Misra said the sentiments are gradually picking up.
“Rural people have started earning their livelihood from June. Since then, things are moving up and the market is expected to be normal by March 2020,” the official of the self-regulatory organisation of the industry said.
Misra said the MFIs do not know how things will unfold due to the raging COVID-19 pandemic.
“Hopefully, there will be no more lockdown,” he added.
Another SRO Sa-Dhan executive director P Satish said that MFI lending activity has now picked up.
“Things will be hopefully normal by December,” he said, adding that disbursements could be 72 per cent of what was achieved in 2019.
“The January- March period will see more disbursement by the MFIs”, he added.