No penal interest will be charged to borrowers during the loan moratorium period: SC

The Supreme Court today rejected requests from various business associations and legal entities to extend the six-month loan moratorium period offered by the Reserve Bank of India (RBI).

The highest court said that granting relief such as an interest waiver or the extension of a loan moratorium can have far-reaching consequences for the economy. He also said that the government and the central bank decide economic policy on the basis of expert advice and that the tribunal cannot be expected to have economic expertise, and therefore cannot decide on the soundness of economic policy.

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The Supreme Court further ordered that there be no interest on interest or criminal interest on any amount during the moratorium on a borrower’s loans. He further stated that the amount already invoiced will be credited or adjusted.

On March 27 last year, RBI proposed a moratorium on loan payments accrued from March 1 to May 31, which was then extended to August 31 during the coronavirus-induced nationwide lockdown.

The moratorium was intended to provide relief to borrowers during the COVID-19 pandemic, allowing them to defer payments on IMEs. In October 2020, the central government announced a waiver of compound interest received during the moratorium period on certain categories of loans up to a maximum of 2 crores.

-With input from the agency

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