Loan Forbearance: Loan relief is for personal, home, education, auto, and consumer durables loans.
The banking sector cannot withstand further financial stress, the center told the Supreme Court on Thursday, at a key hearing to decide whether borrowers should be charged additional interest for choosing to defer their EMIs owed during the lockdown related to the US pandemic. coronavirus. The high court is hearing a series of petitions related to the collection of interest on interest (or compound interest) by banks on delayed EMIs by borrowers during the August 31 period under a scheme approved by the Bank. from the Reserve of India that would bring relief to millions. from the people.
This is a matter of fiscal policy and the government is aware of it, said the center in its presentation to the superior court.
Attorney General Tushar Mehta, representing the center, told the Supreme Court that it is the responsibility of the banks to accredit the compound interest exemption for loans of up to 2 million rupees. The decision has been made that those who paid EMI during the moratorium period cannot be punished. He also outlined the various measures taken by the Ministry of Finance and the RBI to minimize the impact of the pandemic on society, including relief for the real estate sector, the Rs 3 lakh crore package for MSMEs, the Rs 20 Aatmnirbhar package. lakh crore and the liquidity of Rs 19.8 lakh crore boosted power distribution companies.
The attorney representing the individual borrowers expressed appreciation to the Supreme Court for taking the borrowers’ hand.
Previously, the RBI had instructed banks and other financial institutions to credit the difference in compound interest and simple interest on eligible loan repayments up to Rs 2 crore due between March and August before November 5.
Credit relief is for personal, home, education, auto, and consumer durables loans, loans to micro, small, and medium-sized enterprises (MSMEs), in addition to micro, small, and medium-sized enterprises (MSMEs) loans, and credit card fees. credit, subject to applicable conditions. .
Lenders were asked to credit the amount regardless of whether the borrower opted for the relief in whole or in part, and claimed a refund from the government before December 15.
The government has decided to bear the cost of the plan, estimated at 6.5 billion rupees.
The amount, which is the difference between compound interest and simple interest over the six-month period, paid by the lenders on the eligible loans will be repaid by the government at a later date.
Meanwhile, the power producers informed the Supreme Court that although a moratorium is applied to the main loan, the banks are taking enforcement measures on guarantees and other aspects. It is a “subterfuge that is happening” on the part of the banks, they pointed out. The higher court told the power producers to give their suggestions to the RBI and the Center, and asked the banking regulator to respond to the relief requested by the power producers.
Previously, the government was forced to reconsider its loan relief plan after the RBI allowed borrowers to postpone installments on loans that are due between March and August, but also allowed banks to charge interest for such delays. That meant that the borrower could pay later, but at an additional cost.
Initially, on March 27, the RBI had issued the circular that allowed credit institutions to grant a moratorium on the payment of installments of term loans that mature between March 1, 2020 and May 31, 2020, due to the pandemic. Subsequently, the moratorium period was extended until August 31 of this year.
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