By Priyanka Sambhav
If you had opted for loan moratorium between March to August and was feeling the burden of “interest on interest” then this news will bring a cheer to you. After going back and forth government seems to have taken a decision. The Finance Ministry has submitted an affidavit to Supreme Court saying that they will give relief on compound interest for loans under moratorium but only on loans up to Rs 2 crore only.
This is what the Finance Ministry’s affidavit is saying-
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“The Government has decided to continue the “tradition of handholding the small borrowers” and therefore, it has waived interest for the most vulnerable category of borrowers.”
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Eligible Loans- Up to RS 2 Crore
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Categories of borrowers whose compound interest will be waived
MSME borrowers
Education Loan
Home Loan
Auto Loan
Consumer durable Loans
Personal Loan
Credit Card dues
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This benefit will be given to those borrowers also who were timely paying their dues. But the modalities of how will it be rolled out will be given later.
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If the banks were to bear the burden of this interest waiver then a considerable amount of its net worth will be wiped and will cause an adverse financial impact on depositors. It said that the only solution under the circumstances is that “the government bears the burden resulting from waiver of compound interest and this court would be satisfied that government bearing this burden would naturally have an impact on several other pressing commitments being faced by the nation”.
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Affidavit has said the government will seek due authorisation from parliament for making appropriate grants in this regar
This matter will be up for hearing by a bench headed by Justice Ashok Bhushan on 5th October. SC has been hearing a plea filed by Agra’s Gajendra Sharma who is seeking relief on interest payment on loan amount during the moratorium period.
