The Supreme Court on Tuesday held that there will be no interest on interest charged from any borrower during the loan moratorium period of six months. However, the apex court also ruled that there cannot be any further extension of the moratorium and that the banks cannot fully waive interest as they are liable to account holders and pensioners.
The SC said no direction can be issued to the govt or RBI to announce any particular financial packages or reliefs, and held that it cannot issue directions to provide relief to particular sectors over and above others as govt has also lost revenue and had its own constraints.
The apex court furthermore directed that there shall be no interest on interest or penal interest on any amount during the loan moratorium from any borrower. Interest on interest charged so far will be adjusted in the next EMI and compound interest will be charged in cases of willful default.
SC observations:
> There is no justification for waiving compound interest only on loans of up to Rs 2 crore. There shall be no interest on interest or compensation interest during the moratorium period, irrespective of the loan amount. If any such amount has been collected it shall be refunded.
> Justice Shah said: “Courts are not advisers to the executive on matters of economic policy. Pandemic affected all sectors and govt had to take measures such as providing transport to migrants, etc. Even govt had no support during Pandemic and even GST loss that was incurred.” (Inputs from Bar & Bench)
> Justice Shah said: “We have considered reliefs independently. Waiver of complete interest is not possible as banks have to pay interest to account holders and pensioners”.
> “What is an economic policy or what will be financial package be will be decided by the Centre and RBI after detailed consultations.”
> “From various steps taken by Centre and RBI, it cannot be said that centre has not taken steps in the backdrop of COVID19.”
> Courts are not advisers to the executive on matters of economic policy. Pandemic affected all sectors and govt had to take measures such as providing transport to migrants etc. Even govt had no support during Pandemic and even GST loss that was incurred
Here’s what has happened previously:
> The Reserve Bank of India (RBI) had on March 27, 2020, announced a moratorium on loan instalments due between March 1 and May 31. The moratorium period was later extended by three months till August 31, 2020.
> The moratorium was intended to provide borrowers relief during the COVID-19 pandemic, enabling them to defer payments on EMIs.
> The top court had in September 2020 ordered that accounts that were not non-performing assets (NPAs) as on August 31 should not be classified as NPAs until further orders.
> In October 2020, the central government announced a waiver of compound interest charged during the moratorium period on certain categories of loans of up to Rs 2 crore.
