During the hearing of the loan moratorium case in the Supreme Court on Tuesday, a three-judge bench ruled that it is not possible to forgive the entire loan interest during the mortuary period. Banks will have to pay the depositors. However, the Supreme Court directed on the interest on interest case that no compound interest or punitive interest will be charged from the borrowers for the six-month loan moratorium period from March to August 2020 and if any amount has already been taken, Then it will be credited back or adjusted.
This decision of the Supreme Court is going to increase the expenditure of about 7,000 to 7,500 crores of the central government. Icra Limited Vice President Anil Gupta said that according to estimates, the compound interest would be around 13,500 to 14,000 crores over a six-month loan moratorium period. The central government has already announced a grant of relief on loans up to Rs 2 crore, which is about Rs 6,500 crore. He said that now after the latest decision of the Supreme Court, the government will have to give additional relief of Rs 7,000 to 7,500 crore to the borrowers.
The Supreme Court on Tuesday refused to extend the moratorium period, rejecting the appeal of the Traders Association and the appeals to waive interest in the loan moratorium period, as the decision would also affect the depositors. The apex court refused to interfere in the central government’s and RBI’s decision not to extend the loan moratorium beyond 31 August 2020, saying it was a policy decision. The Lone Moratorium was announced last year in the wake of the Corona epidemic.
The Supreme Court said that there is no justification as to why the interest charged on loans up to two crore rupees will be waived. If someone has taken a bigger loan than this, then he will not get the benefit of interest waiver. If someone had taken a low loan and paid interest on the interest, it would be refunded. Recently, the government had announced a waiver of interest on interest during the moratorium to the borrowers of up to two crore.
The central government had filed an affidavit in the Supreme Court stating that the compound interest (interest on interest) applicable on MSME loans, education, housing, consumer, auto, credit card dues and consumption loans would be waived. According to the government, in the six-month loan moratorium time, the interest will be waived on the loan interest of up to Rs 2 crore.
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