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Supreme Court’s big verdict: Interest waived on interest but Moratorium will not go ahead

Loan Moratorium: In view of the Kovid-19 crisis, the Reserve Bank of India provided the facility of postponing EMI from March 1, 2020 to August 31, 2020.

The Supreme Court has ruled to waive interest on the loan Moratorium applied during Kovid-19. The Supreme Court has said that during the loan moratorium period, interest on interest, in the form of compound interest or penalty, will not be recovered from the borrower. That is, those who had decided to postpone EMI, the interest will be waived on the additional interest charged. However, the Supreme Court has refused to take a decision on extending the applicable moratorium period till 31 August 2020. While rejecting the plea to increase the moratorium, the Supreme Court has said that it cannot interfere with the decisions of the Center and the Reserve Bank of India on decisions related to the policy.

What will be the effect on your EMI?

In view of the Kovid-19 crisis, the Reserve Bank of India had provided the facility of postponing EMI from March 1, 2020 to August 31, 2020. The Reserve Bank announced this relief on 27 March 2020. You will still have to pay the EMI that was given during the Moratorium, but during these 6 months, the interest that is charged on their interest will not be paid. The Supreme Court has said that the customers from whom it has been charged should either be given this credit, that is to be returned or it should be adjusted in their future EMI.




With this decision, the court has made it clear that the interest will be exempt on the interest of the loan, irrespective of the category or amount of money. In fact, this has brought a cleanliness on the debt of more than 2 crores. The government had earlier told that the loan waiver on the interest of small ticket size, i.e. those who are less than 2 crore rupees, would result in a burden of 6,500 crore rupees on the government. The government had said to bear the burden of interest on interest on loans of less than Rs 2 crore in 8 categories. According to the decision of the Supreme Court, now all categories and all loans will be exempted from compound interest. The Supreme Court says that what is the basis for fixing the limit of 2 crores rupees.

Former Deputy Governor of Reserve Bank R Gandhi says that banks may have to bear the burden of interest on loans of more than 2 crores. Also, there will be some loss in the income of banks due to the interest being waived by interest.

The duration of the moratorium will not increase

The Supreme Court has refused to interfere with the decision of the Center and the Reserve Bank of India to not extend the moratorium period. The Supreme Court refused to review it, saying it was a decision related to the policy. The Supreme Court has said that they cannot review the financial policy of the Center unless it is malicious or arbitrary. The Supreme Court said that they cannot interfere on what priority the government sets for relief from the Kovid-19 epidemic.

The Supreme Court has taken this decision on the petition of several trade organizations, who had sought to extend the period of Moratorium due to the epidemic.

Parvesh Maurya
Parvesh Maurya
Parvesh Maurya, has 5 years of experience in writing Finance Content, Entertainment news, Cricket and more. He has done BA in English. He loves to Play Sports and read books in free time. In case of any complain or feedback, please contact me @ praveshmaurya24@gmail.com
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