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SC Defers Hearing On "Interest On Interest" During Moratorium To 13 Oct


On Monday, at the hearing on the case of extension of loan moratorium in light of COVID-19 and waiver of interest on interest during the period, the Supreme Court has asked all the affidavits to be submitted by 12 October. The next hearing on the case is scheduled for 13 October.


The court said that the Kamath committee report was not brought on record as petitioners argued that many issues have not been dealt with in Centre's affidavit.

The Kamath committee is a 5-member committee formed by RBI, headed by former ICICI Bank CEO KV Kamath to make recommendations on the financial parameters to be considered for the one-time restructuring of loans impacted by the COVID-19 pandemic and is meant to address sectoral issues.

The Supreme Court also said that the RBI had not issued any consequential orders or circulars based on the affidavit submitted by the government, and asked the central bank to do the same.

All stakeholders, including Indian Banks Association and banks, have to submit their reply to Centre's proposal in a week's time.

SC Defers Hearing On

On 2 October, the government had informed the apex court on its decision to waive interest on interest during the moratorium period for MSMEs and individual borrowers with loans up to Rs 2 crore.


In an affidavit to the court, the Centre said that "after careful consideration and weighing all possible options" it has decided to "continue the tradition of handholding the small borrowers" with relief on waiver of compound interest during the 6-month moratorium period.

The compounding of interest will be waived for MSME loans and personal loans up to Rs 2 crore of the following categories:

  • MSME loans of up to Rs 2 crore
  • Education loans of up to Rs 2 crore
  • Housing loans of up to Rs 2 crore
  • Consumer durable loans of up to Rs 2 crore
  • Credit card dues of up to Rs 2 crore
  • Auto loans of up to Rs 2 crore
  • Personal loans to professionals up to Rs 2 crore
  • Consumption loans up to Rs 2 crore

Cost to the government

The Government of India will bear the burden arising on banks from such waiver of interest on interest and compound interest.

Rating agency ICRA said that the cost to the government to bear the burden of this waiver would not be more than Rs 5,000 to Rs 7,000 crore, based on the assumption that not more than 30-40 percent of the overall loans of the banks and NBFCs (non-banking finance companies) will be eligible for relief.


The Supreme Court is hearing petitions by individuals and industry bodies, seeking relief on loan repayments and waiver of interest over interest in view of the adverse economic impact from the pandemic.

The apex court had granted two weeks to the central government, Reserve Bank of India (RBI) and banks to come up with a concrete stand on their waving on interest charged on non-payment during the 6-month moratorium that ended on 31 August.

The Finance Ministry had constituted an Expert Committee in early September accessing the impact of waiver of interest and waiver of interest on interest and other related issues.

Read more about: moratorium supreme court interest
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