The Supreme Court is not happy with details of the government’s proposal to waiving the compound interest on loans during the moratorium period and has asked it to file a new affidavit with a week.
The court said that the affidavit filed by the Centre on its plan to not charge ‘interest on interest’ on loans up to ₹2 crore “fails to deal with several issues raised by petitioners,” according to NDTV.
The Reserve Bank had announced a moratorium on loans for six months but had said interest on unpaid dues during the period will also attract interest once the moratorium is lifted.
The Supreme Court has asked the government to also look into the demands of power producers and real estate developers before filing the fresh affidavit.
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It has asked the Indian Banks’ Association to file its response to the Centre’s proposal on waiver the interest on interest.
The Supreme Court asked the government why the recommendations of the Kamat Committee set up to look at one-time restructuring of loans affected by the Covid impact crisis were not placed before it.
In an affidavit filed in the court last week, the Centre had said that it was ready to waive compound interest on MSME, education, housing, consumer durables, credit card, auto and personal loans up to ₹2 crore.
The government said the cost of the waiver could be about ₹5,000 crore to ₹7,000 crore. It said it cannot exempt compound interest on all loans as that may entail a cost of ₹6 lakh crore, an amount the resource-stricken government cannot afford as it continues to fight the COVID pandemic.
CREDAI, an association of real estate developers, told the court that many of the “facts and figures” in government affidavit were without any basis. It said it did not agree with the government’s claim that the it would take a hit of ₹6 lakh crore if compound interest on all the loans were exempted. It sought a week’s time to file its response.
CREDAI said the sector has not gov any relief package from the government. In response, solicitor general Tushar Mehta said the relief measures were drafted on the basis of the resources available with the government. Senior advocate V Giri, representing the RBI, said eight sectors affected the most by the levy of interest were identified for relief.