The Narendra Modi government on Friday has informed the Supreme Court that interest on interest waiver will be done via a scheme by the lenders which will be issued on or before November 15.
However, the Centre told the Supreme Court that petitioners can’t seek any further interest waiver especially sector-specific relief as courts should be wary of judicially deciding discal management issues.
In an affidavit filed by the union finance ministry on behalf of the union of India, it said the decision to waiver interest on interest can mature into an office memorandum, circular, and order after due process.
Later, the lenders can give relief first in the account of the respective borrowers and then has to approach the Centre for reimbursement, the affidavit said.
It further said a mandatory procedure has to be followed given the vast financial impact involved. For this, the Centre would need an appraisal by the expenditure panel. After appraisal by the panel, it would be placed before the union cabinet for approval. Post cabinet nod, it will require authorisation from the Parliament.
Earlier, the Centre has agreed in the Supreme Court to waive compound interest (interest on interest) charged on loans of up to Rs 2 crores for a six-month moratorium period announced due to the COVID-19 pandemic.
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It said the government will seek due authorisation from parliament for making appropriate grants in this regard and “the endeavour shall be over and above the support of Rs 3.7 lakh crore to MSMEs, Rs 70,000 crore for home loans etc. already extended through the Garib Kalyan and Aatma Nirbhar packages announced by the government earlier”.
It said that the relief to all borrowers in respect of compounding of interest during the period of the moratorium would be admissible to the categories specified irrespective of whether the borrowers had availed the moratorium or not.
“The government, therefore, has decided that the relief on waiver of compound interest during the six-month moratorium period shall be limited to the most vulnerable category of borrowers. This category of borrowers, in whose case, the compounding of interest will be waived, would be MSME loans and personal loans of up to Rs 2 crore,” it said.
The loans were categorised into eight categories by the government including MSME (Micro, Small and Medium Enterprises), education, housing, consumer durable, credit card dues, auto, personal, and consumption. It further said that any individual/entity whose loan amount is more than Rs 2 crore will not be eligible for a waiver of the compounding of interest.
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