Amid profuse anticipation among borrows and banks alike, the Supreme Court of India gave the final nod to Centre’s proposal to waive interest on interest charged during the RBI imposed 3-month Moratorium of March’20, later extended till 31st August.
‘Interest on interest’ waiver approved by SC
The court had taken cognisance of the issue after a petition was filed asking the RBI and Finance Ministry to extend the moratorium. An argument was made that on the one hand due to the lockdown the government is not allowing people to work and on the other, it is asking them to pay interest.
Heeding to the court’s query the Finance Ministry had come out with a scheme to waive the interest on interest charged for all loans under 2 crores during the moratorium period earlier this month, waiting for the Supreme Court’s approval of the same.
The court has asked the Centre to implement the decision without any delay and come with an action plan.
Solicitor General Tushar Mehta told the apex court that “banks will provide waiver and then will be compensated by the government, and the calculation will have different modalities.” When asked about the reason for the delay in implementation of the decision by the SC bench, Mehta said, “November 15 is the outer limit for implementation, but the government will try to implement it even earlier than that.”
The RBI brought the Moratorium in a bid to give borrowers time to clear payments of EMI without being classified as Non-Performing Assets (NPAs).
The SC on September 3 had stated that those accounts which were not declared as NPAs till August 31, shall not be displayed as NPAs till further orders. However, the RBI on October 10 told the apex court that if the stay on NPA account classification continues, then it will have enormous implications for the banking system.