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SC bars Charging Compound Interest/Penal Interest on Borrower During Moratorium [READ JUDGMENT]

Lawstreet Journal 26 Mar 2021 12:15am

Image courtesy: Lawstreet Journal Judiciary SC bars Charging Compound Interest/Penal Interest on Borrower During Moratorium [READ JUDGMENT]

In a case titled ‘Small Scale Industrial Manufactures Association(Regd) v Union of India and connected cases,’ the Apex Court on Tuesday (March 22, 2021) directed that:

there should be no charging of compound interest, interest on interest or penal interest on the installments which were due during the loan moratorium period from March 1 to August 31 last year on any borrower, irrespective of the loan amount.

If such interest has already been collected, it should be either refunded to the borrower or adjusted towards the next installments.

The categories in which the Centre and the RBI agreed to waive compound interest during the loan moratorium period are :

(i) MSME loans up to Rs. 2 crore

(ii) Education loans up to Rs. 2 crore

(iii) Housing loans up to Rs. 2 crore

(iv) Consumer durable loans up to Rs. 2 crore

(v) Credit card dues up to Rs. 2 crore

(vi) Automobile loans up to Rs. 2 crore

(vii) Personal loans to professionals up to Rs. 2 crore

(viii) Consumption loans up to Rs. 2 crore

Background of the matter:

The Reserve Bank of India(RBI) issued a Notification dated 27.03.2020 to permit banks and financial institutions to grant a moratorium of 3 months on payments of all instalments of term loans falling due between March 1st 2020 and May 31st, 2020. This period was later extended by another 3 months till August 31, 2020.

The petitioners, which had initially sought extension of the moratorium up to December 31, again sought extension upto March 31, 2021, stating that the current situation demands and necessitates the same.

On November… Continue Reading...


Tagged: Supreme Court of India  
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