Bhubaneswar/New Delhi: The Centre on Friday expressed before the Supreme Court that it is ready to waive "interest on interest" on loans up to Rs 2 crore during the six-month moratorium period in the wake of Covid crisis.
"This category of borrowers, in whose case the compound interest will be waived, would be MSME loans and personal loans up to Rs 2 crore of the following category—MSME loans, education loans, housing loans, consumer durable loans, credit card dues, auto loans, personal loans to professionals and consumptions loans,” a Times of India report quoted the Finance Ministry as stating before the apex court.
It may be noted that while the RBI had allowed borrowers to seek a six-month moratorium on all loans in view of the economic impact of the pandemic, banks and financial institutions are charging interest as well as the interest liability.
"Under pandemic conditions, the only solution is for the government to bear the burden of waiving of interest," the Finance Ministry said in its affidavit before the Supreme Court.
Earlier the Centre and RBI had earlier argued against the relief on compound interest saying that it would 'result in a very substantial financial burden on several categories of banks'.
The Supreme Court while asking the Centre to present amelioratory measures for the borrowers is slated to conduct hearing on the case on Monday.