MUMBAI: On Monday, the Supreme Court gave the Reserve Bank of India and the Center one week to file additional affidavits on the compound interest exemption issue during the moratorium period for loans up to ₹2 crore.
The higher court will hear the matter on October 13.
It asked the Banking Association of India to submit its response to the Center’s proposal and also directed the government and central bank to consider the issues raised by real estate associations and energy producers.
On Saturday, the government said it will waive ‘interest on interest’ on loans of up to ₹2 million rupees for six months until the end of August, but warned that this will affect “urgent commitments”, such as the fight against the coronavirus pandemic.
He also said that he did not waive the interest charged on all loan categories because that would have made it difficult for the banks to survive.
In its affidavit, the Center 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 Parliament’s approval for the decision.
The measure includes those who have paid their installments, and compound interest will be eliminated for eight sectors: micro, small and medium-sized enterprises (MSMEs), loans for education, housing, durable consumer goods, credit card installments, loans for automobiles, personal and professional loans. and consumer loans.
The Finance Ministry will have to seek Parliament’s approval in the winter session to obtain additional funds to support the compound interest exemption. The impact of the exemption on public finances is expected to be limited and in the range of ₹6,500 crore, according to economists.
The Reserve Bank of India (RBI) had extended the moratorium on loans to August 31 on May 22, as businesses came to a standstill amid the nationwide shutdown. 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.
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