Centre files affidavit in Supreme Court over interest waiver scheme on loan moratorium

The Centre has filed an affidavit before the Supreme Court with regards to the loan moratorium, where the Centre has stated that the Ministry of Finance has approved the policy of interest waiver scheme for borrowers of specified loan for a period ranging from March 1 to August 31. 

As per this scheme, the lending institutions will credit the difference between compound interest and simple interest for the six-month period in respective accounts of the borrowers irrespective of whether the borrower has fully or partially availed the moratorium announced by the Reserve Bank of India on March 27, 2020, on repayment of the loans.

The scheme will be implemented in the form of grant of ex-gratia payment of the difference between compound interest and simple interest for a period of six months from March 1 to August 31. The affidavit states that the difference between compound interest and simple interest will be deposited in the account of borrowers by November 5.

The Supreme Court is scheduled to hear the loan moratorium petitions seeking a direction to waive interest on interest on November 2. The petitions of Gajendra Sharma and others, including the plea filed by Supreme Court lawyer, Vishal Tiwari, will be heard by the Supreme Court. The court will also go through the RBI, Centre and other respondents' affidavit filed in the case.

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Finance Ministry's approval

The Finance Ministry in an official order on Friday stated, "the undersigned is directed to convey that in view of the unprecedented and extreme COVID-19 situation, the Central government has approved "Scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months to borrowers in specified loan amounts (March 1, 2020, to August 31, 2020). Benefits under the scheme would be routed through lending institutions."

The scheme includes housing loan, education loans, credit card dues, auto loans, MSME loans, consumer durable loans and consumption loans. The relief will also be extended through financial institutions like banks, non-banking financial companies (NBFCs), NCFC - Micro Finance Institutions, National Banks for Agriculture and Rural Development, housing finance companies, National Housing Banks, etc.

"The rate of interest would be as prevailing on February 29, 2020, in case the rate of interest has changed thereafter, it shall not be reckoned for the purposes of this computation. They payable ex-gratia amount shall have to be credited to the account of the borrower by the respective lending institutions as ex-gratia payment under the scheme," the order said.

(Image: PTI)

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