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Old 01-07-2016, 02:06 PM
greg2 greg2 is offline
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Join Date: Jan 2016
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Default Credit linked subsidy in India

Hi all,

I stumbled upon this scheme by the Government of India of 'credit linked subsidies' and am somewhat puzzled how it works.

It says...

"Beneficiaries of Economically Weaker section (EWS) and Low Income Group (LIG) seeking housing loans from Banks, Housing Finance Companies and other such institutions would be eligible for an interest subsidy at the rate of 6.5 % for a tenure of 15 years or during tenure of loan whichever is lower. The Net Present Value (NPV) of the interest subsidy will be calculated at a discount rate of 9 %."

I thought an interest subsidy is commonly understood as the ability to deduct the interests paid on a mortgage from your taxable income. I presume this is not meant here though, am I correct?

Also, could somebody explain the NPV bit? I understand the concept from the investment side but am not sure what it would be doing here.

With many thanks and best wishes,
Greg
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