Introduction to ex gratia payment
- An ex gratia payment is presented to an individual by an organization, government, or insurer for damages or claims. Still, it does not need the admittance of liability by the party initiating the payment.
- An ex gratia payment is viewed as voluntary because the party making the payment is not obligated to compensate the individual. In Latin, “ex gratia” indicates “by favor.”
Understanding Ex Gratia Payments
Ex gratia payments are different from legally mandated payments because ex gratia payments are known to be voluntary. Usually, organizations, governments, and insurers will provide compensation to victims only if they are legally obliged to do so. Due to this, ex gratia payments are not popular.
In the matter of an insurance company, if any policyholder suffers from an injury covered by the terms included in their insurance policy, the insurer is lawfully obligated to pay for the claim. This type of payment is not seen as voluntary. It is the outcome of a legal obligation, and it typically carries with it an admission of liability.
In opposition, an ex gratia payment is a gesture of goodwill. The kind of payment is made following a particular loss or damage to property; an ex gratia payment does not carry with it an admission of liability. A company producing a one-time credit to its customers would not be deemed to be making an ex gratia payment as the payment is not related to a particular loss. However, a company that presents a credit after a service disruption would be considered to be making an ex gratia payment.
Note: A company can make ex gratia payments in cases where the recipient has endured a loss; but, such a transaction is not considered as an admission of liability.
Who Will Be Eligible For The Ex-gratia Payment Scheme?
The essential criteria to qualify for the waiver under this scheme
The account should be listed as “Standard” as of Feb 29, 2020. This indicates that loan accounts which have been reported as non-performing assets on or before this date will not be eligible.
The outstanding loan amount should not surpass INR 2 crores.
At Fullerton India, this scheme is being extended for the following products as per the regulatory guidelines: - Personal Loans (granted to professionals like lawyers, chartered accounts, etc. only) - Two Wheeler Loans - Home Loans - Commercial Vehicle Loans - Loan Against Property - MSME Loans
