SC gives November 2 deadline to Centre for an action plan to implement waiver of compound interest

Directing the government to implement the decision to waive “interest on interest” without delay, yesterday the Supreme Court directed the Centre to come back “with an appropriate action plan” on November 2.  The above direction came from Apex court when solicitor general Tushar Mehta, representing the Centre, said the waiver would come into effect by 15 November. Justice Ashok Bhushan, heading the bench, responded, “Why one month’s time to implement such a small decision? Benefits of government’s concessions to borrowers up to ₹2 crores must be implemented as soon as possible.” It’s not fair on Centre’s part to take a month to implement the decision,” Justice Ashok Bhushan added. “The common man’s Diwali is now in the hands of the government,” the bench hearing the case said, “We will expect the implementation of the government’s decision on interest waiver by then”, the Court said. For this Mr.Mehta submitted before the bench that he had mentioned 15 November as the outer limit and assured the court the government will try to implement the waiver earlier than that. The Solicitor General also told the court that “banks will waive interest on interest and then will be compensated by the government and the calculation will have different modalities.” The case was adjourned to November 2.

Petitioners for individual borrowers said banks have been levying interest on interest and wanted this stopped. The bench comprising Justices R. Subhash Reddy and M.R. Shah said that since the government has already exempted small borrowers from paying compound interest, these amounts should not be debited from their accounts.

In March, RBI allowed a three-month moratorium on repayment of all term loans due between 1 March and 31 May. On 22 May it extended the moratorium on term loans till 31 August amid the lockdown. Further, it was clarified by the Banking regulator that loans that were in default for more than 30 days as of 1 March will still not be eligible for a debt recast even if a part of the dues was subsequently repaid by the borrower. 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.