Sunday, April 2, 2023

SC says it is ‘inclined’ to rule against compound interest during moratorium period

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New Delhi: The Supreme Court today indicated that while it has taken no decision yet on the issue of interest on loans during the court-ordered moratorium period, it was “inclined” to pass an order against banks charging additional interest during the period. This would come as a huge relief for harangued borrowers, whose financial positions have been destroyed in this pandemic. The compound interest issue has been hotly debated in court.

The court gave the government counselor, Solicitor General Tushar Mehta, time to get a reply from the Centre and the RBI, but said that it should be a “concrete reply” so that the matter is not adjourned again. The court’s last hearing will be on September 28.

While the initial moratorium period for loans and EMI payments ended in August, issues of additional interest rates by banks during the grace period are dragging on in court. The moratorium on declaration of NPAs has been extended by the court.

SG Mehta said: “Two or three rounds of stakeholder meetings have taken place and it (the extra interest issue) has been examined.” He also said that an expert committee at the highest level has been constituted in order to make a decision on the issue of moratorium extension, interest during the moratorium, interest on interest and other related issues.

The SG asked for two weeks’ time from the bench of Justices Ashok Bhushan, R. Subhash Reddy and MR Shah to place on record the requisite affidavit. The bench said that its interim orders shall continue till the next date. The court also wants all decisions taken by the RBI, GoI or the banks to be placed before it for consideration.

Read Also: Covid worsening, court should stop physical hearings, says senior lawyer’s letter to Delhi HC CJ

Appearing on behalf of the Indian Banking Association (IBA), senior advocate Harish Salve said the government has not taken any firm position on the matter yet. “A new resolution has come, which is to be registered and norms will be effectuated. For the individual borrower, the common man, the state bank had effectuated guidelines,” said Salve.

-India Legal Bureau

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