Compound interest exemption regime to be published by November 15: Ministry of Finance
The Ministry of Finance informed the Supreme Court that the decision to bear the cost of compound interest for borrowers of loans up to Rs 2 crore for the six month moratorium was taken in the public interest in the specific context of the pandemic.
The decision’s implementation scheme will be in place by Nov. 15, the ministry’s affidavit filed with the court said. The finance ministry also asked not to grant any further measures in the case apart from what has already been decided and submitted to the court.
Implementation framework by November 15
The eight categories of loans for which compound interest, or interest on interest, may be eliminated include various terms and conditions, interest rates and different methods of calculation and composition, and an in-depth study is required. in progress to formulate the modalities for implementing the decision, the ministry said.
Said process would be to get an assessment made by the Expenditure Finance Committee, and thereafter, would be submitted to the Union Cabinet for approval. After the approval of the Union Cabinet, a memorandum / circular / order of the office will be issued, which will require the subsequent authorization of Parliament to incur expenditure in excess of the current budgetary provisions, ”the ministry response said. .
The framework for credit institutions to follow in granting the compound interest waiver will be put in place through a schedule to be issued through an office memorandum by Nov. 15, according to the affidavit. .
Credit institutions will have to implement the waiver within one month from the date of issuance of the bureau’s memorandum and thereafter they may apply to the central government to reimburse the cost of the waiver.
Another relief could impact the economy: government
The finance ministry also asked the court not to grant any further relief in the petitions heard in this case by the highest court.
The response filed by the ministry highlights the steps it and the Reserve Bank of India have taken to provide relief to individuals, small businesses and large businesses in the wake of the pandemic. He opposes petitioners’ demands such as seeking sector relief and expanding the scope of RBI’s restructuring framework announced in August.
“Applicants / Intervenors cannot seek sectoral waiver or restructuring relief through this proceeding under Section 32 of the Indian Constitution, as the issue of such financial stress management measures requires the ‘examination and taking into account of several financial parameters and their impact. and are not fit to be adjudicated or reviewed, ” the ministry’s affidavit said.
He also says that going further than what has been decided and submitted to the tribunal can be detrimental to the national economy and the financial sector.
The highest court is hearing a batch of petitions seeking relief from compound interest payments following a six-month moratorium on loans made by the RBI at the discretion of lenders.
On instruction from the highest court to make a decision on the petitioners’ claims, the government has decided to bear the cost of compound interest on loans up to Rs 2 crore for this period. This would be available for:
Sustainable consumer loans
Credit card charges
Personal loans to professionals
At the last hearing, the court asked the government and the RBI to file their responses to the grievances highlighted by some petitioners. The case will then be heard on October 13.