Compound interest

IBA contacts government for reimbursement of compound interest exemption from banks

The Association of Indian Banks (IBA) on behalf of the lenders approached the

The Supreme Court’s March judgment ordered banks to waive compound interest on loans above Rs 2 crore by invoking a moratorium as loans below that amount earned general interest on interest waiver in November from Last year.

The compound interest support scheme for loan moratorium cost the government Rs 5,500 crore in 2020-21, and the scheme covered all borrowers including the one who did not avail of the moratorium.

Various banks are at different stages of executing the order.

Managing Director of Punjab & Sind Bank, S Krishnan, said the charge on the bank due to the waiver was around Rs 30 crore.

The issue of repayment of the waiver amount by the government is being pursued by IBA on behalf of the banks, he said.

Asked if the

This time, the Supreme Court’s order is limited only to those who have availed themselves of the moratorium. Thus, the liability of the public sector bank is expected to be less than Rs 2,000 crore according to rough calculations, sources said.

On March 27 last year, the RBI announced a loan moratorium on the payment of term loan installments falling due between March 1 and May 31, 2020, due to the pandemic, later it has been extended until August 31.

On March 23, 2021, the Supreme Court ordered that no compound or penal interest be charged to borrowers for the six-month loan moratorium period, announced last year amid the COVID-19 pandemic, and that the amount already invoiced is refunded. , credited or adjusted.

The Supreme Court refused to interfere with the Center and the Reserve Bank of India (RBI) decision not to extend the loan moratorium beyond August 31 last year, saying it would was a political decision.

Rejecting requests for a complete waiver of interest, the court found that such a decision would have consequences for the economy. The bench also said waiving interest would affect depositors. Along with this, the court also rejected the claims for further relief in the matter.

Shortly after the order, the RBI directed banks and NBFCs to immediately put in place a board-approved policy to refund/adjust “interest on interest” charged to borrowers during the six-month moratorium. months, in accordance with the Supreme Court ruling.

The central bank has also requested credit institutions to disclose the aggregate amount to be repaid/adjusted to their borrowers based on the relief in their financial statements for the year ended March 31, 2021.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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