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Full waiver of interest on interest in Loan Moratorium case: SC

The loan moratorium case has been in the Supreme Court for a long time. The apex court on Tuesday ruled that there shall be a waiver of interest on interest regarding equated monthly instalments which were not paid after availing of the loan moratorium scheme by the Reserve Bank of India.

We know the Reserve Bank of India had on March 27 announced a loan moratorium scheme, to grant relief to the borrowers amid the pandemic time. The loan moratorium was introduced between March 1, 2020, and May 31, 2020, and later, it was extended till August 31, 2020.

However, even after opting for a loan moratorium, the banks have collected interest on interest. Now, the Supreme Court has directed that the interest on interest should not be charged from selected borrowers. Banks are ordered to adjust the amount into the customer’s account if they have already charged interest on the loan.

The Court also said if any amount collected as compound interest shall be settled to the next instalment, instead of paying back it to the borrower.

The loan relief was meant for personal, housing, education, auto and consumer durables loans, loans to micro, small and medium enterprises (MSME), besides loans to micro, small and medium enterprises (MSME) and credit card dues, subject to applicable conditions.

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