The Supreme Court on Monday gave a week's time to the Centre and the RBI to file a comprehensive reply related to issues mentioned in the batch of petitions, demanding interest waiver on loans during six-month moratorium. The apex court also deferred the hearing till October 13.
The Supreme Court's 3-judge bench, headed by Justice Ashok Bhushan, said the government affidavit doesn't deal or mention several issues arising in the case. The SC asked the Indian Banks' Association to file its opinion on the Centre's proposal. The government as well as the RBI have also been told to consider the demands of the real estate and power producers' bodies.
The government, during a hearing on Saturday, had told the SC that it would waive 'interest on interest' on loans up to Rs 2 crore during the six month loan moratorium. The Centre also informed the top court that taking such a decision would hurt its efforts in fighting COVID-19 pandemic.
In its affidavit submitted in SC on Friday, the Centre said the only solution is for the government to bear the burden of waiving of interest. "This category of borrowers, in whose case the compound interest will be waived, would be MSME loans and personal loans up to Rs 2 crore of the following category -- MSME loans, educational loans, housing loans, consumer durable loans, credit card dues, auto loans, personal loans to professionals and consumption loans," said the finance ministry.
Notably, the government had earlier refused to waive interest, stating that it would affect the banks. However, after recommendation of a government panel, set up after the Supreme Court asked them to help borrowers, the Centre changed its stance.
The RBI had allowed borrowers to seek a six-month moratorium on all loans due to the pandemic. However, the banks and housing finance companies continued to charge interest on the entire amount -- the principal and the interest liability.