The Supreme Court on Tuesday refused to intervene in the loan relief policy on the grounds that it does not have expertise on issues of financial and economic health. The Supreme Court bench of Justices Ashok Bhushan, R Subhash Reddy and MR Shah was hearing a batch of petitions on whether to waive interest payments on coronavirus support loans in a move that could give relief to millions of people.
In its affidavit, the RBI had pointed out that any waiver of interest on interest would entail significant economic costs on banks and this, in turn, would have huge implications for depositors and broader financial stability.
The central bank had earlier instructed banks and other financial institutions to credit the difference in compound interest and simple interest on repayments of eligible loans up to Rs 2 crore due between March and August, by November 5 last year.
The loan relief was meant for personal, housing, education, auto and consumer durables loans, loans to micro, small and medium enterprises (MSME), besides loans to micro, small and medium enterprises (MSME) and credit card dues, subject to applicable conditions.
The lenders were asked to credit the amount irrespective of whether the borrower fully or partially opted for the relief, and claim a reimbursement from the government by December 15.
The government has decided to bear the cost of the scheme, estimated at Rs 6,500 crore.
The amount – which is the difference between compound interest and simple interest for the six-month period – paid by lenders on eligible loans will be reimbursed by the government at a later date.
On March 27, the RBI had issued a circular allowing lending institutions to grant a moratorium on payment of instalments of term loans due between March 1, 2020 and May 31,2020 on account of the pandemic. The moratorium period was later extended till August 31.