PremiumMUMBAI: The Supreme Court on Monday granted the Reserve Bank of India and the Centre a week’s time to file additional affidavits on the issue of waiving off compound interest for the moratorium period for loans up to ₹2 crore.
The top court will next hear the matter on 13 October.
It has asked the Indian Banks’ Association to file its response on the Centre's proposal and also directed the government and the central bank to consider issues raised by the real estate associations and power producers.
On Saturday, the government said it will waive 'interest on interest' on loans of up to ₹2 crore for six months through the end of August, but warned this will impact “pressing commitments" such as fighting the coronavirus pandemic.
It also said it did not waive the interest charged on all categories of loans because that would have made it difficult for banks to survive.
In its affidavit, the Centre said that due to unprecedented conditions "the only solution is for the government to bear the burden of waiving of interest" and that it will seek Parliament's approval for the decision.
The move includes those who have cleared their dues, and the compound interest will be scrapped for eight sectors: micro, small and medium enterprises (MSMEs), education loans, housing, consumer durables, credit card dues, auto loans, personal and professional loans and consumption loans.
The finance ministry will have to seek the Parliament’s approval in the winter session for additional funds to support the waiver of the compounding interest. The impact of the waiver on government finances is expected to be limited and is expected to be in the range of ₹6500 crore, according to economists.
The Reserve Bank of India (RBI) on 22 May had extended the moratorium on loans till 31 August as businesses ground to a halt amid the nationwide lockdown. In March, it had allowed a three-month moratorium from paying EMIs and on payment of all term loans due between 1 March and 31 May.
