Loan moratorium: Centre asks banks to reimburse 'interest on interest'

The Supreme Court had on March 23, 2021, said compound interest should not be charged during the six-month moratorium period.

Loan moratorium: Centre asks banks to reimburse 'interest on interest'

The Ministry of Finance has informally asked banks to reimburse or adjust the compound interest charged during the loan moratorium period.

Banks have been instructed that they can adjust the amount against future liabilities for all accounts, regardless of whether they availed the moratorium or not, Business Standard has reported.

The Supreme Court had on March 23, 2021, said compound interest should not be charged during the six-month moratorium period.
The top court had said there is no justification for waiving compound interest only on loans of up to Rs 2 crore, as announced by the Centre in October 2020.


The top court directed banks to refund any interest on interest collected during the moratorium period.

Moneycontrol could not independently verify the story.

Banks are getting ready to make a representation to the Reserve Bank of India (RBI) and the Centre through the Indian Banks' Association (IBA), the report stated.

Moneycontrol on April 17 reported that HDFC Bank has provided around Rs 500 crore to refund the interest-on-interest amount to borrowers, but is awaiting the IBA's final decision.

The RBI had on March 27, 2020, announced a moratorium on loan instalments due between March 1 and May 31. The moratorium period was later extended by three months till August 31, 2020.

Source: MoneyControl