NEW DELHI/MUMBAI (Reuters) – India’s top court refused to extend a six-month moratorium on loan repayments that ended on Aug. 31 last year, offering huge relief to banks, but said no borrowers can be charged any form of additional interest incurred during that period.
The Reserve Bank of India (RBI) had allowed banks to offer a repayment moratorium to borrowers for six months starting March last year after Prime Minister Narendra Modi’s government imposed the world’s strictest COVID-19 lockdown.
However, petitioners ranging from individuals to trade associations had complained that extra interest accrued during the moratorium that would be charged to customers after repayments restarted would have the effect of increasing the burden on borrowers.
Rejecting pleas to extend the moratorium, the top court said the government and central bank decide on economic policy based on expert opinion, and the court cannot be expected to have economic expertise.
Based on the various steps taken by the RBI and the central government, Justice M. R. Shah said while reading out the judgement, the issues facing borrowers had been addressed. But, he said, “There should not be any charging of interest on interest.”
Indian banks had hoped borrowers would not be given further respite beyond the waiver on compound interest for loans up to 20 million Indian rupees ($276,000) for six months, the interest burden the government had agreed to bear and to compensate banks.
The top court, however, said there was no rationale for extending the waiver of interest only for loans up to 20 million and said all borrowers, irrespective of the loan amount or category, should receive the waiver and have interest, if already charged, refunded in some form by banks.
India’s Nifty PSU bank index, which tracks state-run banks, rose as much as 3.93% to its highest since March 17 after the verdict. The Nifty Bank index, which tracks 12 large capitalized stocks from the banking sector, rose as much as 2.07%.
Disclaimer :- This story has not been edited by The Sen Times staff and is auto-generated from news agency feeds. Source: Reuters