The Reserve Bank of India (RBI) on October 14 told the Supreme Court that the Centre has agreed to waive compound interest (interest on interest) charged on loans of up to Rs 2 crore for the six-month moratorium period announced in the wake of the COVID-19 pandemic.
Asking the government to implement the decision to waive "interest on interest" without delay, the Supreme Court directed the Centre to come back "with appropriate action plan" on November 2.
Assuring the court that the government's decision will come into effect before November 15, Solicitor General Tushar Mehta told the apex court that "banks will waive interest on interest and then will be compensated by the government and the calculation will have different modalities."
When asked about the reason for the delay in implementation of the decision by the SC bench, Mehta said, "November 15 is the outer limit for implementation, but the government will try to implement it even earlier than that."
Earlier in March, the RBI had announced a moratorium on repayment of term deposits for three months citing COVID-19 pandemic. Later it was extended till August 31. The central bank aimed to give borrowers more time to clear payments of EMIs, without being classified as non-performing assets (NPAs).
Following this, the SC on September 3 had stated that those accounts which were not declared as NPAs till August 31, shall not be declared as NPAs till further orders.
However, the RBI on October 10 told the apex court that if the stay on NPA account classification continues, then it will have huge implications for the banking system.
Meanwhile, banks are waiting for the RBI circular, said senior advocate Harish Salve who is representing the Indian Banks' Association.
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