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SC waives interest on interest on loans exceeding Rs 2 crore too | India News


NEW DELHI: In great relief to borrowers large and small, the Supreme Court ruled Tuesday that the interest-on-interest waiver would apply to loans of all amounts in the six-month moratorium period from March 1 to March 31. August last year during the Covid-19 Pandemic and said the Center’s decision to put a 2 crore cap on the loan amount for relief lacked foundation and logic.
A bench of judges Ashok Bhushan, RS Reddy and MR Shah said: “Once the payment of the fee is deferred according to the circular of March 27, 2020, it cannot be said that the non-payment of the fee during the period of moratorium is intentional and therefore there is no justification to charge interest on interest / compound interest / criminal interest during the period during the moratorium. ”
Writing the 148-page judgment for the court, Judge Shah said: “Therefore, we are of the opinion that there will be no interest charge on interest / compound interest / criminal interest during the period during the moratorium of any of the borrowers.And whatever the amount that is recovered as interest on interest / compound interest / penal interest during the period of the moratorium, it will be repaid and adjusted / granted credit in the next installment of the loan account “.
Except for this blow, the Center’s other decisions to provide aid to individuals, industry, and corporate businesses during the pandemic period won healthy praise from the SC, which said: “It appears that the best that can be offered has been offered. for the different fields and to ordinary people, as well as to people who are affected by the Covid19 pandemic. ”
The court reviewed and rejected a number of petitions filed by industries and borrowers seeking various types of financial relief, including the extension of the moratorium period and the full waiver of interest during the moratorium period.
However, the bank said that the issue of waiving interest on interest during the six-month moratorium period when the government had offered to defer the payment of equal monthly installments for loan repayments was on a different basis. The government had waived interest on deferred EMI interest for loans of up to Rs 2 million taken by MSMEs, education loans, auto and home loans, personal loans and credit card fees.
Judge Shah said: “No justification has been shown for restricting the relief of not charging interest on interest with respect to loans up to Rs 2 crore only and that it is also restricted to the aforementioned categories. What is the basis? to restrict it to 2 million rupees – it is not available. Therefore, as such, there is no reason to restrict such relief with respect to loans of up to 2 million rupees only. ”
The Center’s decision of October 23, 2020 to grant a waiver of interest on interest was qualified with the clause that the cumulative loans taken by an individual or industry must be less than 2 million rupees. Judge Shah explained the fallacy of the scheme with an example. “If the borrower has been sanctioned with a loan of Rs 5 crore and has made use of it, although he could have paid off substantially, reducing the principal amount to less than Rs 2 crore as on February 29, 2020, but due to the sanction of the loan amount of more than 2 crore rupees, it will not be eligible, “he said.
“It also states that the outstanding amount should not exceed 2 million rupees and, for this purpose, the sum of all facilities with the lending institution will be accounted for. Therefore, if a borrower, for example, the MSME category, you have availed and have an outstanding business loan of Rs 1.99 crore and also have your credit card installments of Rs 1.1 lakh, so the add-on to Rs 2.1 crore, is not eligible. Therefore, the above-mentioned conditions would be arbitrary and discriminatory, “he added.
The CV pointed to various plans announced by the government during the pandemic to provide relief to various sectors of the economy and said the government did its best despite resource shortages due to low GST generation.
“The Center has announced the ‘Garib Kalyan package’ for Rs 2 lakh crore, which includes food grains, pulses, gas cylinders and free cash payment for women, elderly poor and farmers; ‘Aatmanirbhar package’ for various sectors such as energy, real estate, MSMEs. It also enacted a Rs 3 lakh crore credit-linked emergency guarantee scheme that provides additional credit at a lower interest rate, with a 100% government guarantee and no new guarantees. The scheme has been expanded with higher financial limits to 27 sectors affected by Covid-19 including the restaurant and hotel sectors. The Center has also provided subordinated debt of Rs 20 billion with partial credit guarantee for more than 2 lakh of stressed MSME units including those in the hospitality sector, “he said.

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