Loan Moratorium News Today Supreme Court: It's a good news for loan borrowers! In a major development, the Supreme Court on Tuesday directed that no compound or penal interest shall be charged from borrowers for the six-month loan moratorium period, which was announced last year amid the COVID-19 pandemic, and the amount already charged shall be refunded, credited or adjusted.

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Also, the apex court refused to interfere with the Centre's and Reserve Bank of India (RBI's) decision to not extend the loan moratorium beyond August 31 last year, saying it is a policy decision.

A bench headed by Justice Ashok Bhushan said the top court cannot do judicial review of the Centre's financial policy decision unless it is malafide and arbitrary.

The apex court said it cannot interfere with the government's decision to fix priorities for relief during the pandemic which has affected all across the country.

The bench said this in its verdict on a batch of pleas filed by various trade associations, including from real estate and power sectors, seeking extension of the loan moratorium period and other reliefs in view of the pandemic.

A bench headed by Justice Ashok Bhushan which had reserved its verdict on the batch of pleas on December 17, last year, will pronounce the judgement.

The Centre had earlier submitted before the top court that if it were to consider waiving interest on all the loans and advances to all categories of borrowers for the six-month moratorium period announced by RBI in view of COVID-19 pandemic, then the amount foregone would be more than Rs 6 lakh crore.

If the banks were to bear this burden, then it would necessarily wipe out a substantial and a major part of their net worth, rendering most of the lenders unviable and raising a very serious question mark over their very survival, it had said.

The government said this was a main reason as to why waiver of interest was not even contemplated and only payment of instalments was deferred.

Giving an illustration, it had said that in case of State Bank of India alone (which is the largest bank in the country), waiver of six months' interest would completely wipe out over half of the bank's net worth which has accumulated over nearly 65 years of its existence.

It had pointed out the sector-specific relief measures taken by the government for the small and mid-sized business/MSMEs including from sectors such as restaurants and hotels.

The Centre has promulgated emergency credit-linked guarantee scheme (ECLGS) of Rs 3 lakh crore providing additional credit at lower rate of interest, with 100 per cent government guarantee and no fresh collateral, it had said.

The scheme has been extended with higher financial limits to twenty seven COVID-19 impacted sectors including restaurant and hotel sectors, it had said.

On November 27 last year, the top court had asked the Centre to ensure that all steps be taken to implement its decision to forego interest on eight specified categories of loans paid up to Rs 2 crore in view of the coronavirus pandemic.