April 13, 2024


Delighting finance buffs

Will there be interest on interest? SC asks Centre in loan moratorium petition

The Supreme Court will again hear the matter on July 17 and has asked the Centre to have discussions with stakeholders and reply whether there will be “interest on interest” due to the loan moratorium.

The Supreme Court has asked the government to have discussion with all stakeholders in the loan moratorium matter and reply whether individuals will have to pay additional interest due to the moratorium. (Photo: Reuters/Representational image)

The Supreme Court on Friday told the government that they are seeking a “wider measure” in the petition filed by an individual against interest being charged by banks during the loan moratorium period.

“We are doing balancing. The only thing we are wanting is not a wider measure,” the Supreme Court bench hearing the petition said.

“Our concern in these proceedings is only whether the interest that has been deferred for 3 months will be added to charges payable later and whether there will be interest on the interest,” the SC bench added.

Replying to the bench, Solicitor General Tushar Mehta said the Centre has sought a meeting with stakeholders including the Reserve Bank of India (RBI), which has already said expressed how difficult it will be for banks to not charge interest on monthly payments during the moratorium period.

Mehta said, “I have sought a meeting with RBI.”

In reply, the Supreme Court bench said, “If the RBI reply goes much beyond the query posed by us there will be a lot of opinions on it. Efforts will be made to sway it one way or another.”

“Our query was limited. Whether the payment will impose interest on interest.”

The plea seeking a stop on charging interest during on loan moratorium has garnered negative reactions from many economists including ex-RBI governor D Subbarao.

While RBI backed banks and said it will lead to a Rs 2 lakh crore loss for banks, SC criticised the central bank for putting money ahead of peoples’ lives.

The Supreme Court in today’s hearing again asked for a wider solution to the problem.

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