Centre to waive interest on interest during moratorium on loan up to Rs2 cr
IANS 03 October 2020
In a major relief to thousands of individuals and MSME borrowers, the Centre in an affidavit informed the Supreme Court that it has taken a decision to waive "interest on interest" on loans up to Rs two crore during the six-month moratorium period.
The affidavit said the only solution is that the government should bear the burden resulting from waiver of compound interest.
"After careful consideration and weighing all possible options, the respondent Union of India has decided to continue the tradition of handholding the small borrowers", said the Centre. The categories of loans up to Rs two crore include: MSME loans, education loans, housing loans, consumer durable loans, credit card dues, auto loans, personal loans to professional and consumption loans.
The Centre said it is impossible for the banks to bear the burden resulting from waiver of compound interest without passing on the financial impact to the depositors or affecting their net worth adversely, which would not be in larger public interest.
The affidavit said: "The government, therefore, has decided that the relief on waiver of compound interest during the six-month moratorium period shall be limited to the most vulnerable category of borrowers."
After the recommendations of an expert committee, the Centre has altered its stand. Previously, the RBI and Centre had argued against waiver of interest on interest, as it would be against the interests of other stakeholders, especially depositors, and also unfair to those who have paid their dues.
A bench comprising Justices Ashok Bhushan, R.S. Reddy and M.R. Shah had urged the Centre to have a re-look at its decision in the backdrop of financial hardship faced by many amid the ongoing Covid-19 pandemic. Although, the top court had agreed to not waive interest altogether.
The Centre said the Supreme Court would be satisfied that the government bearing this burden would naturally have an impact on several other pressing commitments being faced by the nation, including meeting direct costs association with the pandemic management.
The Centre also cited the example of waiving interest on interest for banks. "In case of SBI alone, waiver of six months' interest would completely wipe out over half of the bank's net worth which has accumulated over nearly 65 years of its existence", said the affidavit.
The apex court will take up the matter on October 5 for further hearing. A clutch of petitions was filed in the top court seeking waiver of interest on interest on the deferred EMIs during the moratorium.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
1 year ago
Possibly one of the biggest scams in history, not sure how so many people could be fooled, obviously if someone promises you 200% interest and gives you a piece of paper you cant possibly expect to get your money back, its a pyramid scheme and only a matter of time before it collapses
1 year ago
I have nothing to do with Sahara Group, however This is all bullshit news, gathered people for media to create a propoganda, I have seen Sahara pay back Doc's of at least 40 people working overseas who had totally forgotten about their Investments & were surprised to see a Sahara 'To Claim Letter' reach their home in India.
If Sahara CEO wanted to run away, he could have, long time back. Fuss is totally different than is being shown.
Is there any harm if the poor-man is investing daily savings INR-10 for a good returns, instead for INR-2L
Replied to khhk1628 comment 1 year ago
Dont know what is your reason to post lies here, but yesterday, Sahar's PR department called me and admitted that they are having cash flow problems and struggling to make payments. They also claimed to have made payments, but have not provided details. We will moderate comments that mislead our readers! This is not about opinion and freedom of speech but basic facts.
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