In a huge relief to loan borrowers, the government on Friday told the Supreme Court it supports the waiver of compound interest on loans under moratorium for certain categories. The waiver will be applicable on repayment of loans of up to Rs 2 crore during the six-month moratorium period.
The Centre in its affidavit submitted to the court stated that it has decided to continue the “Tradition of handholding the small borrowers" and therefore, it has waived interest for the said period for the most "vulnerable category of borrowers".
The interest waiver will apply to MSMEs, education loans, housing loans, consumer durable loans, credit card dues, auto loans and personal loans amongst others.
The waiver on interest for the categories specified by the government will be irrespective of whether the borrower has availed of the moratorium.
Any individual/entity whose loan amount is more than Rs 2 crore will not be eligible for the waiver of compounding interest.
"Under pandemic conditions, the only solution is for the government to bear the burden of waiving of interest," the government said in its affidavit to the court.
The case is again to be heard by the Supreme Court on Monday.
The COVID-19 pandemic and the related shutdown in the entire country had forced the RBI to grant borrowers a six-month loan moratorium which ended on August 31.
But with the economy still not revived, borrowers were demanding extension of the moratorium period to which the RBI said it would add a lot of burden on the banks. However, the government has decided to give some relief in the form of waiving the compound interest on loans under moratorium.