Ex-gratia on interest differential for COVID loan accounts
No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2020-21/61 · issued 26 Oct 2020 · ~2 min read
Quick answerThe Government of India announced a scheme on October 23, 2020, requiring lending institutions to provide ex-gratia payment to borrowers in specified loan accounts. This payment covers the difference between compound interest and simple interest for the period from March 1, 2020, to August 31, 2020. RBI has directed all commercial banks, cooperative banks, NBFCs, and financial institutions to follow the scheme's provisions and take necessary action within the stipulated timeline.
What changed
The Government of India announced a scheme on October 23, 2020, requiring lending institutions to provide ex-gratia payment to borrowers in specified loan accounts. This payment covers the difference between compound interest and simple interest for the period from March 1, 2020, to August 31, 2020. RBI has directed all commercial banks, cooperative banks, NBFCs, and financial institutions to follow the scheme's provisions and take necessary action within the stipulated timeline.
What it means for you
Banks and lenders must identify eligible loan accounts and credit the interest differential to borrowers, impacting their interest income for the period. This is a regulatory obligation with a fixed timeline, requiring immediate operational adjustments to avoid non-compliance. The scheme aims to provide relief to borrowers affected by the COVID-19 pandemic.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Identify all loan accounts eligible under the scheme as per the government's definition.
Calculate the difference between compound interest and simple interest for the period March 1 to August 31, 2020.
Credit the ex-gratia amount to eligible borrowers' accounts within the stipulated timeline.
Maintain detailed records of calculations and credits for audit and regulatory review.
Ensure compliance with the scheme's provisions as detailed in the government's notification.
Who it affects
All commercial banks including small finance banks, Local area banks and regional rural banks, Primary urban cooperative banks, State and district central cooperative banks, All-India financial institutions, Non-banking financial companies including housing finance companies
❓ Common questions
Regulatory timeline
Decoded by BankPulse2026-06-18 08:58 IST
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn03 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the ex-gratia payment under this scheme?
It is the difference between compound interest and simple interest for the six-month period from March 1, 2020, to August 31, 2020, which lenders must credit to eligible borrowers.
Who are the eligible borrowers under this scheme?
The scheme specifies certain categories of loan accounts; lenders must refer to the government's scheme document for exact eligibility criteria.
What is the deadline for implementing this scheme?
RBI advises all lending institutions to take necessary action within the stipulated timeline as per the scheme, but the exact date is not specified in this notification.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed byRBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #337: DOR.No.BP.BC.26/21.04.048/2020-21 — "Scheme for Grant of Ex-gratia Payment of Difference Between Compound Interest and Simple Interest for Six Months to Borrow”
📜 Read the original circular — full text as issued by RBI
RBI/2020-21/61
DOR.No.BP.BC.26/21.04.048/2020-21
October 26, 2020
All Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks)
All Primary (Urban) Co-operative Banks/State Co-operative Banks/ District Central Co-operative Banks
All All-India Financial Institutions
All Non-Banking Financial Companies (including Housing Finance Companies)
Madam/Dear Sir,
Scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts (1.3.2020 to 31.8.2020)
The Government of India has announced the Scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts (1.3.2020 to 31.8.2020) ( the ‘Scheme’ ) on October 23, 2020, which mandates ex-gratia payment to certain categories of borrowers by way of crediting the difference between simple interest and compound interest for the period between March 1, 2020 to August 31, 2020 by respective lending institutions. The details of the Scheme are available at:
https://financialservices.gov.in/sites/default/files/Scheme%20Letter.pdf .
2. All lending institutions are advised to be guided by the provisions of the Scheme and take necessary action within the stipulated timeline.
Yours faithfully,
(Prakash Baliarsingh)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2020-21/61 · issued 26 Oct 2020. The plain-English explanation above is BankPulse’s own independent summary.
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11989&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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