LI NETWORK-
In Supreme Court today government through an affidavit said, due to unprecedented conditions “the only solution is for the government to bear the burden of waiving of interest” and that it will seek the Parliament’s approval for the decision taken.
The Affidavit also states that Centre will waive ‘interest on interest’ charges on loans up to ₹2 crore for six months through August.
In the Pandemic this move of Government can benefit borrowers and will include those who have cleared their dues.
The compound interest on Loans will not be collected for loans taken out for education, housing, credit-card dues, among others, the finance ministry said in the affidavit.
Reserve Bank of India issued a circular on 22 May stating extended moratorium on term loans till 31 August amid the nationwide lockdown due to coronavirus.
In March, it had allowed a three-month moratorium from paying EMIs and on payment of all term loans due between 1 March and 31 May.
Government submitted to the Supreme Court that
if charges are waived off for all categories of loans, it would lead to a ₹6 trillion burden for banks. “If the banks were to bear this burden, it would necessarily wipe out a major part of their net worth, rendering most of the banks unviable and raising a very serious question mark on their survival.”
Supreme Court on 28 September adjourned loan moratorium case till October 5 in order to grant more time to the Central Government, RBI and Banks to file a reply.
Supreme Court sought their reply on waiving interest charged during the moratorium period.
Petitioner submitted to the Supreme Court that interest would continue to accrue during the moratorium. This will ultimately increase burden on the borrower.