SC asks Centre, RBI to ensure compound interest relief on loans reaches beneficiaries

The Supreme Court on Friday asked the Union government and the RBI to ensure that their decision taken to provide relief of compound interest to borrowers of up to Rs 2 crore loan was percolating down to the intended beneficiaries.

A bench of Justices Ashok Bhushan, R Subhash Reddy and M R Shah disposed of a PIL by Gajendra Sharma after he expressed satisfaction with the relief announced on charging of interest on the interest during the Covid-19-induced six-month moratorium on loan.

On October 23, the Union government had told the court that it announced a scheme for grant of ex-gratia payment of the difference between compound interest and simple interest for six months to borrowers in specified loan accounts like MSMEs, education, housing, consumer durables, automobile and personal loans as well as credit card dues up to Rs 2 crore.

Going through the affidavits filed by the Centre, the bench said it is clear that the Union government was fully conscious of the difficulties faced by the various sectors and and and took different measures to mitigate their hardships.

"The pandemic Covid-19 has not only caused serious threat to the health of the people but has also cast its shadow on the economic growth of the country as well as other countries in the entire world. Due to lockdown imposed by the Government of India in exercise of powers under the Disaster Management Act, 2005, there can be no denying that most of the businesses including private sector as well as public sector have been adversely affected," the court noted.

It said for several months, a large number of industries were not allowed to function and exemptions were granted only to some industries to run and carry on its activities. Although, gradually, due to Unlock - 1, 2 and 3, the industries and other business activities have been restored and the economy of the country is on track but at a slow pace.