Supreme Court today (September 10th, 2020) heard petitions and counter arguments on the matter of charging interest on loan moratorium, and the extension of the loan moratorium due to the lockdown effect and coronavirus.
Although no new verdict or order was provided, but the banks have been asked not to charge interest on interest, due to the loan moratorium.
Next hearing is scheduled for September 28th, 2020.
Here are the highlights..
Supreme Court To Banks: Stop Charging Interest On Loan Moratorium
A Supreme Court bench headed by Justice Ashok Bhushan heard pleas and petitions related to the interest which banks are charging on those who have opted for loan moratorium.
Besides, the matter of extending the loan moratorium was also discussed.
During the hearing, the petitioners stated that they have received letters from banks, stating that they will charge interest on the loan moratorium.
This has been ordered to stop.
The Bench said, “With regard to interest we have yet to take a decision but on the aspect of debiting of interest on interest, we are inclined to pass an order that it may not be debited.”
When the advocates representing banks stated that the interest is charged on compound basis, the Bench said, “Compound interest is fine. But can this default interest be charged?”
Banks have been asked to reply on why they are charging interest on loan moratorium, when the basis of this loan moratorium was lockdown and coronavirus.
Further Restructing Of Loans Possible?
Although RBI has identified 26 sectors that can avail loan restructuring and relief on loan payments, the timeline has not been determined yet.
SBI has admitted in the apex court that at present, only 5% of the loans can be restructured.
Having said that, Supreme Court has clearly asked banks not to declare loans as NPA due to non-payment, and not charge interest as of now.
In the next hearing on September 28th, more clarity is expected.
We will keep you updated, as more details come in.