New Delhi: For Indian IME payers, the loan moratorium was the most important term that dominated the year 2020.
What was the moratorium on loans?
The RBI had published on March 27 the circular which authorized credit institutions to grant a moratorium on the payment of maturities of term loans maturing between March 1, 2020 and May 31, 2020, due to the pandemic. Later, the moratorium was extended until August 31 of this year. The pleas concerned the collection of interest on interest by banks on IMEs that were not paid by borrowers after taking advantage of the RBI’s loan moratorium program from March 1 to August 31.
PIL deposited on interest on interest issuance
A PIL was then filed with the SC requesting instructions to declare the notification dated March 27, 2020 issued by the Reserve Bank of India as ultra vires as it charges interest on the loan amount during the moratorium period. After several rounds of hearings, the Center informed the SC that lenders had been asked to credit to the accounts of eligible borrowers the difference between compound interest and simple interest received on loans of up to Rs 2 crore for the RBI loan moratorium program.
While the Supreme Court ordered the government to ensure that all measures are taken to implement its decision to waive interest on eight specified categories of loans paid up to two crore rupees due to the coronavirus pandemic , the Center maintains that if it were to consider waiving interest on all loans and advances to all categories of borrowers, then the amount lost would be more than Rs 6 lakh crore.
The higher court is hearing a batch of pleadings from various agencies, including real estate and power, seeking sensible relief in the area given the COVID-19 pandemic.
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