The Supreme Court (SC) observed that the debiting of interest on interest should not be allowed. It is likely to pass an order restricting such a practice.
The Apex Court is hearing a batch of petitions seeking interest waiver during the loan moratorium period.
A bench led by Justice Ashok Bhushan and consisting of R Subhash Reddy and MR Shah is hearing pleas seeking extension of the loan moratorium and waiver of accruing interest.
On September 3, SC said banks should not declare accounts as non-performing assets (NPAs) for two months and banks must not take coercive action against borrowers.
The SC had observed, “no merit in charging interest on interest”.
The RBI had on June 4 said lenders will lose Rs 2 lakh crore if interest is waived during the moratorium period.
Senior Advocate Rajiv Dutta, who appeared for a petitioner, had said “interest on interest is absolutely and prima facie wrong and they cannot charge it”.
