The Reserve Bank of India (RBI) filed an affidavit in the Supreme Court (SC) stating that banks and non-banking finance companies (NBFC) have to repay the 'interest on interest' amount collected on loans up to Rs 2 crore during the loan moratorium period by November 5.
The moratorium period under consideration is from March 1 to August 31, and it is on servicing of loans during this period that interest will be repaid by lenders, reported LiveMint. This order will be applicable to all financial institutions and shall be accredited to all eligible borrowers.
"All Primary (Urban) Cooperative Banks/State Cooperative Banks/District Central Cooperative Banks, All All India Financial Institutions and All Non-Banking Financial Companies (including Housing Finance Companies) to be guided by the provisions of the scheme and take necessary actions within the stipulated timeline therein," the report quoted the RBI affidavit as saying.
The RBI had filed an affidavit in the apex court saying that loan moratorium longer than six months may have a "debilitating impact" on the process of credit creation in the economy, and in "vitiating the overall credit discipline", the report said.
The Centre had already informed the SC that lenders would credit the respective amounts by November 5. Banks have to return the difference between simple and compound interest paid for loans up to Rs 2 crore during the six-month window of the loan moratorium.
The lending institutions can claim reimbursement from the central government after this exercise, the report said.