Govt is of the view that the onus of reimbursing compound interest charged to customers does not fall on entirely on itself, said a top govt official
Banks have requested the government to foot the bill of about Rs 8,000 crore that they will have to return to the customers on account of moratorium interest, but the finance ministry seems to be not interested.
The Indian Banks’ Association (IBA) on March 26 wrote a letter to the government seeking representation for enhancing the scope of “ex-Gracia scheme to cover the additional refund out of the Supreme Court Order.”
One senior public sector banker explained that the stance has been taken now as the penal interest also has to be refunded.
“Last time, only the compound interest or interest on interest was waived off. Interest on interest is around Rs 8,000 crore for the whole system. For penal interest, we do not have an estimate as of now. We charge penal interest for various reasons such as non-compliance of certain conditions, non-submission of certain statements,” said the senior banker requesting anonymity.
“According to the judgment, we have to adjust the penal interest in the next installment in April and we have to implement it,” said the banker.
However, the government seems to be clear that they are not going to take on the extra burden. The government is of the view that the onus of reimbursing compound interest charged to customers does not fall on entirely on itself, said a top government official. However, a final decision will be taken at the highest level, he added. Also, the government is yet to receive any proposal from banks, and a final decision will only be taken post-consultation, he said.
The Supreme Court on March 23 had ruled that banks cannot charge interest on interest for accounts that sought moratorium relief during the pandemic period last year and the amount so collected must be refunded in the next installment of the loan account.
The cut-off for such moratorium, the apex court ruled, would be August 31, 2020, beyond which all loans that had not been repaid as per schedule can be declared as non-performing assets (NPA). Rejecting the pleas to extend the six-month loan moratorium period, the court said a complete waiver of interest during the moratorium cannot be granted either.