No penal interest be charged from borrowers during loan moratorium period: SC
No compound, penal interest be charged from borrowers during the loan moratorium period, the amount already charged shall be credited or adjusted, says Supreme Court
The Supreme Court today rejected the pleas from various trade associations and corporate bodies to extend the six-month loan moratorium period offered by the Reserve Bank of India (RBI).
The top court said granting relief such as an interest waiver or extension of a loan moratorium can have far-reaching consequences for the economy. It also said the government and central bank decide on economic policy based on expert opinion and that the court cannot be expected to have economic expertise, and thus cannot decide on the soundness of the economic policy.
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The apex court furthermore directed that there shall be no interest on interest or penal interest on any amount during the loan moratorium from any borrower. It further said that the amount already charged shall be credited or adjusted.
On 27 March last year, RBI had offered a moratorium on loan instalments accrued from 1 March to 31 May which was later extended to 31 August 31 during the nationwide coronavirus-induced-lockdown.
The moratorium was intended to provide borrowers relief during the COVID-19 pandemic, enabling them to defer payments on EMIs. In October 2020, the central government announced a waiver of compound interest charged during the moratorium period on certain categories of loans of up to ₹2 crore.
-With agency inputs
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