The compound interest accrued during the six-month moratorium on the repayment of loans of up to two million rupees taken by individuals and micro, small and medium-sized enterprises (MSMEs) will not be applied, the Center told the Supreme Court in an affidavit on Friday. The moratorium was announced as part of the measures to mitigate the economic difficulties caused by the Covid-19 pandemic and the closure imposed to control its spread in March.
The government made the announcement in the affidavit, as a slew of petitions seeking an exemption from accrual of interest during the moratorium period are pending in court.
However, the affidavit said that the waiver of contractual interest on loans cannot be waived as it will create a huge financial burden for banks estimated at more than Rs 6 lakh crore. “Union of India has decided to continue the tradition of holding small borrowers by the hand. The government has decided that the exemption from the compound interest exemption during the six-month moratorium period (March 1 to August 31) will be limited to the most vulnerable category of borrowers. “
The exemption will apply to MSMEs / entities or individuals who have obtained education loans, home loans, durable consumer loans, auto loans, personal loans, professional loans, etc.
The Center said the decision was made in the interest of borrowers and banks, who could not bear this burden. He had initially opposed the resignation in court. The proposal was also rejected by the Indian Banking Association (IBA) and the State Bank of India, who are represented separately in the matter.
Agra-based businessman Gajendra Sharma was the first to move the court to request the exemption.
A bench of three judges headed by Judge Ashok Bhushan is expected to address the matter on Monday and issue new orders after going through the affidavit. The bank has maintained that it is the responsibility of the Center and the Reserve Bank of India to restrain the borrowers. He has indicated that it was the decision of the Center to impose the closure, closing companies and establishments.
On September 10, the court asked the Center to consider the issue taking into account all the parameters. Previously, with the moratorium that ended on August 31, the court had said that banks will not declare loan accounts as delinquent assets (NPA) for non-payment.
The IBA, which represents 215 banks, told the court that no account will become an NPA for at least two months.
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