New Delhi: March 24, 2021, marks the one year of the nationwide lockdown, announced by Prime Minister Narendra Modi.
COVID-19 brought severe economic consequences while many industries witnessed transformation during the past year. The common man too faced a lot of hardships during the COVID-19 lockdown that ranged from job losses and reduced cash flows to domestic budgetary constraints.
However, timely intervention by the government and financial institution like the RBI kept things on smooth sailing for the common man. Here’s looking back at major announcements made by the government and RBI to ease the burden of the common man during the lockdown.
EMI Moratorium
For the Indian loan borrowers, EMI moratorium was the most important term that dominated the last year. The RBI had on March 27, 2020 issued the circular which allowed lending institutions to grant a moratorium on payment of instalments of term loans falling due between March 1, 2020, and May 31, 2020, due to the pandemic. Later, the moratorium was extended till August 31 this year. The pleas pertained to charging of interest on interest by banks on EMIs which have not been paid by borrowers after availing the loan moratorium scheme of RBI during March 1 to August 31. A PIL was later filed in the SC seeking directions to declare the notification dated March 27, 2020 issued by Reserve Bank of India as ultra vires to the extent it charges interest on the loan amount during the moratorium period. After several rounds of hearing, Centre informed the SC that lenders have been directed to credit in the accounts of eligible borrowers the difference between compound interest and simple interest collected on loans of up to Rs 2 crore during the RBI's loan moratorium scheme. While the Supreme Court has directed the government make sure that all steps be taken to implement its decision to forego interest on eight specified categories of loans paid upto Rs two crore in view of the coronavirus pandemic, the Centre maintains that if it were to consider waiving interest on all the loans and advances to all categories of borrowers, then the amount foregone would be more than Rs 6 lakh crore.
Atmanirbhar Bharat
Among the major financial initiatives that the government launched during the COVID-19 Crisis, was the Atmanirbhar Bharat. The most recent in terms was the Aatma Nirbhar Bharat 3.0 Stimulus. Union Finance Minister Nirmala Sitharaman has announced 12 key measures, as part of Government of India’s stimulus to the economy, under Aatma Nirbhar Bharat 3.0. The net stimulus announced under Aatma Nirbhar Bharat 3.0 amounts to Rs 2.65 Lakh crore. The total stimulus announced by the Government and Reserve Bank of India November, to help the nation tide over the COVID-19 pandemic, works out to Rs 29.87 lakh crore, which is 15% of national GDP. Out of this, stimulus worth 9% of GDP has been provided by the government.
Lower rate of EPF subscription
Various measures have been announced from time to time to provide relief to the employers and employees of the establishments covered under the EPF & MP Act, 1952 distressed by Lockdown to prevent spread of COVID-19 and other disruptions due to Pandemic. The government had announced the reduction in statutory rate of PF contributions from 12% to 10% for wage months May, 2020, June, 2020 and July, 2020 for all class of establishments covered under the EPF & MP Act. Reduction in rate of EPF contributions from 12% to 10% of basic wages and Dearness allowances WAS intended to benefit both 4.3 Crore employees/members and employers of 6.5 lakhs establishments to tide over the immediate liquidity crisis to some extent. As a result, the employee shall had a higher take home pay due to reduction in deduction from his pay on account of EPF contributions and employer also had his liability reduced by 2% of wages of his employees. If Rs.10000/- is monthly EPF wages, only Rs.1000/- instead of Rs.1200/- was deducted from employee’s wages and employer paid Rs.1000/- instead of Rs.1200/- towards EPF contributions.
Income Tax relief for Developers and Home Buyers
Differential between circle rate and agreement value in real estate income tax was being increased from 10% to 20%. This was for primary sale of residential units up to Rs 2 Crore (from date of announcement of the scheme, till June 30 2021). The Income Tax relief was aimed at providing incentive to middle class to buy homes.
Emergency Credit Line Guarantee Scheme
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Emergency Credit Line Guarantee Scheme for MSMEs, businesses, MUDRA borrowers and individuals (loans for business purposes), has been extended till March 31, 2021. Credit guarantee support scheme is being launched for Healthcare sector and 26 sectors stressed due to COVID-19. Entities will get additional credit up to 20% of outstanding credit; repayment can be done in five years (1 year moratorium + 4 years repayment). This announcement came under the Atmanirbhar Bharat 3.0.
