Penal Interest and Moratorium cannot go together: Justice Reddy

The Reserve Bank of India gave a 3-month moratorium for loans so that the common man gets some financial relief during the pandemic. The moratorium was extended till the 31st of August but some accounts that have not made payments on interests are being declared NPAs (Non-Performing Assets).
Petitions regarding the same were sent to the Supreme Court and today the Supreme Court passed an order saying that accounts cannot be declared NPAs until a final decision is made regarding the interest and penalty.
While arguing the case on whether there should be a penalty on the moratorium, Solicitor General Tushar Mehta said, “The idea of the moratorium was to defer repayment to ease the burden caused by COVID and lockdown so that business can manage working capital. The idea was not to waive off interest. The effort is that those who are affected by COVID and facing distress get the benefit and those who are defaulters are not able to take benefit.”
According to Bar & Bench, Justice Reddy said, “Question is about the demands of compound interest in the meantime. Moratorium and penal interest cannot go together. RBI will have to clarify.”

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