New Delhi: On Tuesday, the Supreme Court was informed by the Government of India (GoI) that lenders have been directed to credit in the accounts of eligible borrowers by November 5 the difference between compound interest and simple interest collected on loans of up to Rs 2 crore during the RBI’s loan moratorium scheme, news agency PTI reported.
After crediting this amount, the Finance Ministry of India said that lending institutions would claim reimbursement from the GoI.
In an affidavit filed in the apex court, the GoI has said that the Finance Ministry has issued a scheme as per which lending institutions would credit this amount in the accounts of borrowers for the 6-month loan moratorium period which was announced following the COVID tensions.
The affidavit mentioned that under the scheme, all lending institutions (as defined under clause 3 of the scheme) shall credit the difference between compound interest and simple interest in the respective accounts of eligible borrowers for the period between March 1, 2020, to August 31, 2020.
“The Central government has directed that all lending institutions described in clause 3 thereof shall give effect to the scheme and credit the amount calculated as per the scheme in the respective accounts of borrowers by November 5, 2020” it said.
The affidavit was filed in the top court which is hearing a batch of pleas which have raised issues, including that of interest on interest’, concerning the loan moratorium period.
The affidavit said the amount shall be credited by lending institutions irrespective of whether such eligible borrowers have fully availed or partially availed or have not availed of the moratorium viz. deferment in payment of instalments as per the circulars dated March 27, 2020 and May 23, 2020 issued by RBI.
“After crediting the said amount in the respective accounts of eligible borrowers, the lending institutions would claim reimbursement from the Central government through the nodal agency of State Bank of India as stipulated under the scheme,” it said.
It said the decision has been taken after “careful consideration”, keeping in mind the “overall economic scenario, the nature of borrowers, impact on the economy’ and such other factors as a policy decision earmarking the above-referred class of borrowers for ‘grant of benefits”.
On October 14, the apex court had observed that GoI should implement “as soon as possible” the interest waiver on loans of up to Rs 2 crore under the RBI’s moratorium scheme and had said that the “common man’s Diwali is in the government’s hands”.
The GoI had earlier told the court that going any further than the fiscal policy decisions already taken, such as waiver of compound interest charged on loans of up to Rs 2 crore for moratorium period, maybe “detrimental” to the overall economic scenario, the national economy and banks may not take “inevitable financial constraints”.
The Reserve Bank of India had also filed an affidavit in the apex court saying that loan moratorium exceeding six months might result in vitiating the overall credit discipline, which will have a debilitating impact on the process of credit creation in the economy.
These affidavits were filed following the top court’s October 5 order asking them to place on record the K V Kamath committee recommendations on debt restructuring because of the COVID related stress on various sectors as well as the notifications and circulars issued so far on loan moratorium.