Matter with regard to the extension of loan moratorium along with waiver of interest was pending before the Apex Court which has now been decided.
On March 27, the RBI had announced a moratorium on loan instalments due between March 1 and May 31 and subsequently extended it by three months till August 31, 2020. The Supreme Court while deciding the the petition has observed that it cannot allow waiver of complete interest and extension of loan moratorium
Supreme Court observed:
Petitioners will not be eligible for waiver of interest on interest, extend moratorium period, or sector specific reliefs.
There is no justification for waiving compound interest only on loans of up to Rs 2 crore. There shall be no interest on interest or compensation interest during moratorium period for all borrowers, irrespective of the loan amount. If any such amount has been collected it shall be refunded.
As per inputs from Bar & Bench, Justice MR Shah said: “We have considered reliefs independently. Waiver of complete interest is not possible as banks have to pay interest to account holders and pensioners”.
“What is an economic policy or what will be financial package be will be decided by the Centre and RBI after detailed consultations.”
“From various steps taken by Centre and RBI, it cannot be said that centre has not taken steps in backdrop of COVID-19.”
“Courts are not advisers to the executive on matters of economic policy. Pandemic affected all sectors and govt had to take measures such as providing transport to migrants etc. Even govt had no support during Pandemic and even GST loss that was incurred.”
The government was opposed to waiver of interest during moratorium period as it would burden the banks with an estimated amount of ₹ 6 lakh crores. However, it had proposed waiving of compound interest for loans up to ₹ 2 crores for six categories of borrowers.
The Supreme Court directed that no compound or penal interest shall be charged from borrowers for the six-month loan moratorium period and the amount already charged shall be refunded, credited or adjusted.