11.8 C
New York
Tuesday, December 1, 2020
Home Stories Loan moratorium: Lenders to credit interest on interest' to borrowers by Nov...

Loan moratorium: Lenders to credit interest on interest’ to borrowers by Nov 5, Centre tells SC

The Centre has informed the Supreme Court 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.

The Ministry of Finance has said that after crediting this amount, the lending institutions would claim reimbursement from the Central government.

In an affidavit filed in the apex court, the government has said that the 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-19 pandemic situation.

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 affidavit said.

It said: 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.

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 the Centre 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 Centre 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, may be “detrimental” to the overall economic scenario, the national economy and banks may not take “inevitable financial constraints”.

The Reserve Bank of India (RBI) 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-19 related stress on various sectors as well as the notifications and circulars issued so far on loan moratorium.

It has also said that the apex court’s interim order of September 4, restraining classification of accounts into non-performing accounts in terms of the directions issued by the RBI, may kindly be vacated with immediate effect.

The Kamath panel had made recommendations for 26 sectors that could be factored by lending institutions while finalising loan resolution plans and had said that banks could adopt a graded approach based on the severity of the coronavirus pandemic on a sector.

Initially, the RBI on March 27 had issued the circular which allowed lending institutions to grant a moratorium on payment of instalments of term loans falling due between March 1, 2020, and May 31,2020, due to the pandemic.

Later, the period of the moratorium was extended till August 31 this year.

- Advertisment -

Most Popular

Why Are Rape Cases Increasing Every Year? | And to The Worst Extent Police Are Also A Part of Rape Cases

Rape cases in India: Rape is seen to be one of the major crimes against women for a longer period and has never attained an...

Chinese Scientists Are Now Claiming That COVID Began In India, But That Seems To Indicate More Of A Political Issue Than Backed With Scientific...

In the event that a researcher plans to politicize a pandemic, the most informal strategy would be the age of libertarian hypotheses without social...

Cyclone to hit Tamil Nadu on Dec 4

A cyclone is very likely to hit Tamil Nadu on December 4, the second time in a week, the Cyclone Warning Division of the...

The Negative Report Of “RT-PCR Diagnostic Test” Is Mandatory For Travelers! Delhi Slashes The Cost Of RT-PCR Testing for “COVID-19”

As the number of coronavirus cases is increasing every day, many states have mandated a negative RT-PCR diagnostic test report for travelers from Delhi-NCR...

Recent Comments

%d bloggers like this: