Govt agrees to waive interest on interest on loans as much as Rs 2 crore during moratorium

The Centre on Friday informed the Supreme Court that it has determined to waive “interest on interest” on loans as much as Rs 2 crore throughout the six-month moratorium period, giving a massive relief to retail and MSME debtors.

Those who’ve cleared their mortgage dues throughout the moratorium among March and August will also get the advantage, the Times of India stated in a report.

In its affidavit, the finance ministry stated the authorities has determined to hold its subculture of handholding small debtors and undergo the weight bobbing up from such waiver of interest on interest for the banks.

According to bankers, the value of interest on interest waiver on the abovementioned classes of borrowers could be to the tune of Rs 5,000-Rs 6,000 crore.

The authorities is probably to compensate banks for such interest waiver. However, the modalities of ways the advantage would flow to the ones paying their EMIs and credit card dues throughout the moratorium have been not straight away known.

According to the daily, the Centre’s choice follows the tips of an professional committee headed through former Comptroller & Auditor General Rajiv Mehrishi. Earlier, the Centre and the RBI had argued in opposition to waiver of interest on interest on the grounds that it would be in opposition to the interests of different stakeholders, in particular depositors, and might be unfair to the ones who’ve paid their dues.

“The government, therefore, 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,” the guide quoted the ministry as saying. This might mean loans as much as Rs 2 crore.