Money & Banking

SC adjourns loan moratorium interest case to October 5

Shishir Sinha New Delhi | Updated on September 28, 2020 Published on September 28, 2020

Government indicates it will give decision on relief by October 1

The Supreme Court on Monday adjourned the hearing on relief for the loan moratorium issue till October 5 as the government submitted that a decision on relief will be taken soon.

According to the daily order of the court, Solicitor General Tushar Mehta submitted that the issues are under active consideration of the Government of India and, only after a decision is taken, an affidavit along with the decision can be filed. “The affidavit will be sent by October 1 through email to the appearing counsel,” he told the Bench comprising Justices Ashok Bhushan, R Subhash Reddy and MR Shah.

The Bench is hearing a petition filed by Gajendra Sharma seeking an interest waiver on loan moratorium. This moratorium was given for a period of three months initially, which was later extended to six months. This means a borrower was given option to defer six EMIs.

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However, the problem arose when banks clarified that the interest accrued during these six months would be added to the principal amount and then interest will be levied on that. This meant that the borrower would have to pay a price for the moratorium. For example, SBI posted on its website, “For a home loan of ₹30 lakh with a remaining maturity of 15 years the additional interest payable would be ₹4.54 lakh approximately, equal to additional 16 EMIs.”

The Supreme Court, in one of its hearings, had said it would issue order on the interest on interest.

On September 10, Mehta had told the Court that the Central government was considering the issue raised here in consultation with the RBI and as well as other banks and, within two weeks, a decision would be taken. On the same day, the government had announced that before taking any decision regarding relief sought in terms of waiver of interest and waiver of interest on interest and other related issues, it would like to get the views and suggestions from an expert committee under the chairmanship of former Comptroller & Auditor General (CAG) Rajiv Mehrishi.

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The committee was asked to measure the impact of the waiving of interest, and the waiving of interest on interest, on the Covid-related moratorium on the national economy and financial stability. It was asked to suggest ways to mitigate the financial constraints of various sections of society in this respect and measures to be adopted in this regard.

According to sources, the Committee has submitted its report to the Finance Ministry. Though its views and suggestions have not been made public, it is believed that there is a suggestion for some relief on compound interest (interest on interest) for certain sections of borrowers or for capping the quantum of benefit, with the Centre bearing the cost of this relief.

 

 

 

 

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Published on September 28, 2020
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