Authoring judgment for a three-judge bench, Justice M R Shah said the SC could not understand the rationale behind waiving interest on interest on loans up to Rs 2 crore. It further said that the limit of loans paid up to Rs 2 crore has not been explained.
The top court also stated that any amount collected during moratorium period by banks as interest on interest, penal interest or compound interest, should either be refunded or adjusted against the next EMIs payable by the borrowers.
The said judges are not experts in the financial, economic and commercial sectors and the court would not interfere in the policy decisions in these sectors unless mala fide is proved in the decision making process, the bench added.
The government had earlier submitted before the SC 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 the 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 the main reason why a waiver of interest was not even contemplated and only payment of instalments was deferred.
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. The SC had noted that the moratorium period as granted by the Reserve Bank of India (RBI) continued from March 3 to August 31, six months.
The RBI had on March 27 issued the circular which allowed lending institutions to grant a moratorium on payment of instalments of term loans falling due between March 1 and May 31, 2020, due to the pandemic. Later, the moratorium was extended till August 31, 2020.
(With inputs from PTI)