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RBI’s scruple about renouncement of interest on loans during the 6 month suspension on payment of EMIs did not amaze the apex court , which on Thursday gave the finance ministry a time of 1 week to consider the issue and after that file a considered reply to interest waiver on borrowings , with home loans as well.
The affidavit submitted by the RBI before the Supreme Court had said that banks were mediators between the borrowers and depositors and contended that any move to relinquish interest on loans would have a straight impact on interest gained by the depositors. Furthermore, it can seriously impact the banking business, the central bank had mentioned.
A bench of Justices Sanjay Kishan Kaul, M R Shah and Ashok Bhusan called out RBI for seeping out its affidavit to the press even before its stand could be communicated in front of the court and clarified that it was not impressed with the position of the regulator’s, which affected crores of borrowers, specifically those who have gone for home loans.
Senior advocate Rajiv Dutta contended that banks would ask for more interest and affix that to the principle every month and then ask for interest on interest even when the “eyewash” of a pause on repayment of EMIs was implemented. “In fact, the borrower will have to pay much more than what he would have paid normally i.e. if there was no suspension because of this interest on interest concept,” he said.
The bench directed that, “Mehta shall get required instructions from the finance ministry as well as the higher official of the RBI, for which he requests for a week’s time.” The matter was scheduled for further hearing on 12th June. If the government accepts to not charge interest on interest, or permits renouncing of interest, then it would lead to problems as those borrowers who have paid regular EMIs without gaining the suspension will have to face a disadvantage for obeying the loan agreement. For, they have paid money not just for the EMIs but the interest as well adding on the loan amount.
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