The Supreme Court on Tuesday adjourned until Thursday its hearing in the case on a loan relief scheme for borrowers to help them tide over the coronavirus pandemic. The top court agreed to defer the hearing to November 5 on the government’s request, as the Solicitor General is engaged in some other case. The top court is hearing a batch of petitions relating to charging of interest on interest – or compound interest – by banks on EMIs delayed by borrowers for the March-August 31 period under a scheme approved by the RBI that could give relief to millions of people.
All banks and other financial institutions in the country have been instructed by the RBI 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.
The loan relief is meant for personal, housing, education, auto and consumer durables loans, loans to micro, small and medium enterprises (MSME), as well as loans to micro, small and medium enterprises (MSME) and credit card dues, subject to certain conditions.
(Also Read: Will Your Credit Card Dues Be Covered In COVID-19 Loan Relief?)
The lenders will credit the amount irrespective of whether the borrower fully or partially opted for the relief. They will have to claim the reimbursement by December 15, according to the scheme.
The government has decided to bear the cost of the scheme, reportedly estimated at Rs 6,500 crore.
The amount – the difference between compound interest and simple interest for the six-month period – paid by lenders on eligible loans will later be reimbursed by the government.
This month, the top court directed the government to give the loan relief to eligible borrowers “as soon as possible”, saying that any delay in its implementation is not in the interest of the common man.
(Also Read: “Common Man’s Diwali…”: Top Court Nudge For Loan Relief By November 2)
The government was forced to rethink its loan relief scheme after the RBI allowed borrowers to postpone their loan instalments due between March and August, but also permitted banks to charge interest on such delays. That meant the borrower would be able to pay later, but at additional cost.
Initially, the RBI on March 27 had issued the circular which allowed 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. Later, the period of the moratorium was extended till August 31 this year.