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Interest on interest’ waiver: What you need to know

A moratorium is a period of relief that is implemented in the event of an emergency that has severe economic ramifications. Such was the case with the pandemic. As the government of India announced a nationwide lockdown, bringing massive amounts of economic activity to a halt, alongside travel and trade routes being shut that further impacted economic activity, the government afforded a moratorium on loans taken between March 2020 and August 2020.

The Ruling

Usually, a personal loan repayment plan is calculated based on compound interest. Meaning, interest is not only charged on the principal amount but on the interest that accrues as well. If you were to calculate personal loan EMI for instance, it would take this accrual into account, resulting in interest on interest being charged.

According to the recent Supreme court ruling, all lenders including banks were not permitted to charge interest on interest during the moratorium period. Subsequently, any interest on the interest that was charged on a slew of loans including housing and education loans among others, had to be refunded to the borrower’s account. In this article, let’s take a look at what the interest on interest waiver means, its implications, and whether you qualify under the scheme to get back interest on interest payments you may have made on a personal loan etc other loans.

The Eligibility Criteria.

According to the proposition made by the government of India, the following qualify for the interest on interest waiver scheme.

  1. In order to qualify under the scheme, the loan amount cannot exceed that of Rs. 2 Crores.
  1. Education loans, personal loans, MSME loans, consumer durable loans, automobile, credit card loans and housing loans all qualify under the scheme.
  1.  Only those who have availed of a personal loan etc from a banking company, a public sector bank, a regional/rural bank or a housing finance company are eligible for interest on interest waivers.

Refund procedure.

In order to make the refunds from the interest on interest waiver more efficient, the following guidelines were proposed.

  1. Borrowers can avail of refunds on personal loans or other loans irrespective of whether they have availed of, in full or in part, the moratorium granted by the government.
  1. The difference between the simple and compound interest on the housing loan, education loan, personal loan or any other loan would be refunded for the period between the first of March 2020, and August 2020.


Due to the economic consequences of the lockdown, further relief on the moratorium period was recently ruled on by the supreme court. Based on this, the difference between the simple interest and compound interest on your loan can be claimed as a refund. If you are looking to take a loan, however, the Finserv MARKETS website has a slew of personal loan offerings to suit each individual’s needs and requirements, with various offerings for every budget. Additionally, you can also visit the Finserv MARKETS website in order to calculate personal loan emi to pick the optimum loan amount for you.

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