On March 27, the RBI had issued a circular which allowed lending institutions to grant a moratorium on payment of instalments of term loans falling due between March 1, 2020, and May 31, 2020, due to the pandemic. Later, it was extended till August 31.
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The Supreme Court on Friday, citing various affidavits, said the Centre was fully conscious of the difficulty faced by the various sectors and the stakeholders of various sectors. The top court said the decision to forego interest on eight specified categories of loans paid up to Rs 2 crore should reach the needy.
A bench headed by Justice Ashok Bhushan and comprising Justices R. Subhash Reddy and M. R. Shah disposed off the petitions and applications seeking waiver of compound interest during the moratorium. The top court said the Centre should “ensure that all steps be taken to implement the decision dated October 23, of the Government of India, Ministry of Finance so that benefit as contemplated by the Government of India percolates to those for whom the financial benefits have been envisaged and extended.”
The top court said the COVID-19 pandemic not only poses a serious threat to health but has also cast its shadow on the economic growth of the country and other nations in the world.
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The eight categories of loans are: MSME (Micro, Small & Medium Enterprises), education, housing, consumer durables, credit cards, automobiles, personal and consumption.
The top court noted that due to the lockdown imposed by the Centre, there can be no denial that most of the businesses including the private sector as well as the public sector have been adversely affected. And, for several months, a large number of industries were not allowed to function and exemptions were granted only to a few industries to carry on their activities, which were found essential and necessary.
“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 although at a slow pace”, observed the bench.
On March 27, the RBI had issued a circular which allowed lending institutions to grant a moratorium on payment of instalments of term loans falling due between March 1, 2020, and May 31, 2020, due to the pandemic. Later, it was extended till August 31.
The petitioners challenged charging of interest on interest by banks on EMIs during the moratorium period.
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