NEW DELHI: The Center will waive ‘interest on interest’ charges on loans until ₹2 crore for six months through August.
In an affidavit to the Supreme Court, the government said that due to unprecedented conditions “the only solution is for the government to bear the burden of waiving interest” and that it will seek the approval of Parliament for the decision taken.
The measure will benefit thousands of small borrowers and will include those who have paid off their debts. Compound interest will be eliminated from loans obtained for education, housing, credit card fees, among others, said the Ministry of Finance in the affidavit.
The Reserve Bank of India (RBI) had extended the moratorium on term loans on May 22 until August 31 amid the national shutdown due to covid-19. In March, it had allowed a three-month moratorium on the payment of EMI and on the payment of all term loans that are due between March 1 and May 31.
The government has said that eliminating fees for all loan categories would result in ₹Charge of 6 trillion to the banks. “If banks were to bear this burden, it would necessarily wipe out a significant portion of their net worth, rendering most banks unviable and raising a very serious question mark about their survival.”
On September 28, the high court postponed the loan moratorium case until October 5, giving the Center, the RBI and the banks more time to work together and present a response on their position on the waiver of interest charged. during the moratorium period.
On September 3, it had approved an interim order, holding that accounts not reported as non-performing assets (NPAS) as of August 31 will not be classified as additional orders. The provisional order was extended on the last hearing date.
Petitioner Gajendra Sharma, in his plea, had argued that interest would continue to accrue during the moratorium, which would ultimately have to be paid by the borrower. He had argued that no interest should be charged during the moratorium because people face “extreme difficulties”.
.
