RBI had announced a loan moratorium on March 27 last yr.(Picture: REUTERS)
The Supreme Court of India today dominated in favour of waiving compound interest, ie, interest on interest in the course of the six-month moratorium introduced by the Reserve Bank of India last yr. The apex court stated that banks won’t charge compound interest or penal interest on any amount in the course of the moratorium interval for all borrowers, PTI reported. Along with this, the court has additionally rejected pleas by various trade associations to increase the mortgage moratorium that led to August last yr. Banking shares on Dalal Road surged increased after the Supreme Court’s ruling and Financial institution Nifty jumped 1.4%.
The Supreme Court further directed banks to credit or regulate the amount already charged by them from borrowers. The court added that it can’t do a judicial review of the Centre’s monetary policy decision until it’s malafide, arbitrary. The judgment was delivered by a Bench of Justices comprising Justice Ashok Bhushan, R Subhash Reddy and MR Shah. The bench had reserved the judgement on December 17.
Rejecting pleas for an entire waiver on interest the court opined that such a move would have consequences on the economic system. The bench additionally stated that interest waiver would have an effect on depositors. Along with this, the court additionally rejected pleas for additional aid within the matter. “The Supreme Court judgment is very welcome,” stated Mahesh Misra, CEO, IMGC (India Mortgage Guarantee Corporation). “Any other outcome would have created a potential moral hazard and also penalized conscientious borrowers. This creates the right precedent as well,” he added.
Earlier the central government had informed the apex court that waiving interest on all of the loans and advances to all classes of borrowers for the moratorium period in the course of the pandemic would end in Rs 6 lakh crore in foregone amount. The court was informed that waiving the amount would wipe out a considerable a part of the net price of banks.
The RBI had on March 27 last yr announced a loan moratorium on payment of instalments of term loans falling due between March 1 and May 31, 2020, because of the pandemic, later the same was extended to August 31.
