Scheme for compound interest waiver during loan moratorium period to take effect by November 5: Centre tells Supreme Court

The Centre has informed the Supreme Court that the scheme formulated to give benefit of compound interest waiver to small borrowers for period of loan moratorium will be given effect to by November 5..In its affidavit filed on October 23, the Centre has informed the Supreme Court that the benefit of compound interest waiver promised by the Centre for small borrowers was taken after detailed deliberations and considerations and will be given effect to by November 5..The Centre, in this affidavit, is responding to the Apex Court's question as to when the scheme announced would be implemented. The Court, during the previous hearing in the case, had asked the Centre and RBI to give a concrete answer as to when the scheme will be implemented..Plea challenging interest on loans during RBI Moratorium period: LIVE UPDATES from Supreme Court.The Centre's decision to bear the economic burden of waiving the compound interest for small borrowers to extend the benefit to the eligible beneficiaries is a "welcome step", the Court had said, but "the small borrowers want to see some results. Consider the plight of the common man," the Bench headed by Justice Ashok Bhushan had added..Now, the Court is told that the Centre has directed all the lending institutions to give effect to this scheme of compound interest waiver by November 5 by which time the amount calculated as per the scheme would have to be credited to the accounts of the eligible beneficiaries..There are eight categories of eligible beneficiaries for this scheme and the difference between the compound interest and simple interest computed for these beneficiaries for the period between March 1 and August 31 will be credited back to them. This step would be taken regardless of whether or not the eligible borrowers have availed the loan moratorium benefit or chose to avail it in part, the Centre adds further..The lending institutions can then claim the reimbursement of this amount credited to borrowers from the Central government through the nodal agency, which is the State Bank of India..This decision of waiver of compound interest was taken by the Finance Ministry and assurance given to this effect by the government lawyers before the Supreme Court. The decision, however, came to be approved by the Cabinet on October 21 and pursuant to this approval, the Finance Ministry has now issued the scheme, the affidavit submits..Earlier, the RBI and the Centre had, in separate affidavits, given details of the steps taken by them to give relief to borrowers in the wake of the pandemic and the economic effect of it. One of the steps taken by the government was to provide compound interest waiver tot small borrowers. RBI has, from its end, issued a circular providing for a resolution plan and loan restructuring of accounts that did not default prior to the country being hit by the pandemic..Extension of moratorium beyond six months unsustainable, might vitiate credit discipline and increase delinquency: RBI to Supreme Court.While the Court, in the previous hearing, sought to know when the scheme on waiver would take effect, it is likely to hear the parties on other aspects on November 2 when the case is scheduled to be taken up next..Read Affidavit: