The Ex-Gratia Payments

ex-grata payment, moratorium, interest on interest

Are you still wondering what is ex-gratia credit you received in your account?

Or how did they (government) calculate this amount?

Am sure, most of you have heard a lot about ex-gratia payments. Let us see what it is.

What is the ex-gratia payment?

Its a grant extended by Govt of India, which is calculated as the interest on interest on the total EMI amount paid or availed moratorium from 27th March 2020 till 31st August 2020.

Having said that, how do we calculate?

Let us say, you have a loan of ₹ 1L @ 12%, then 5-month interest is ₹ 5, 000 (1% per month). Now, if for the 5 months from April to August, Govt was asked to give some relief to the existing borrowers(borrowing limit up to 2 Cr), considering if you do not pay the interest, then there will be an assumed interest on interest – 1% per month of 5K I.e. ₹250. And this is what is we can define as ex-gratia amount.

For 5 months of the moratorium period, you were paid back ₹250 as part of the central government grant.

What made them do this?

Although the government was not in favour of this initiative as it involves large outflow from the exchequer account, but a Supreme Court ruling based on a PIL filed made Central Government to consider this scheme.

Who all are eligible for this?

If you have any loan below 2 Cr (including a credit card outstanding) as on 29th Feb 2020, then you are eligible for ex-gratia payment.

Even if you are someone who paid on time or did not avail any moratorium, it is still applicable for you.

They did not want to discourage borrowers who paid on time.

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