The waiver of interest on interest is Rs 2,000 crore for public banks

The Supreme Court has recently waived federal interest on all credit accounts for the exemption period for loan installments during March-August 2020 due to the Kovid-19 pandemic. The decision of the Supreme Court is to give public sector banks a sum of Rs 1,800 to Rs 2,000 crore. May cause loss, ‘the sources said.

The court in its decision exempted compound interest for loans of more than Rs 2 crore. Interest was waived in November last year for a loan less than this amount. During the concession on installment payments, the Federal Interest Support Scheme will cost the government Rs 5,500 crore in 2020-21. About 60 per cent of borrowers initially took advantage of this discount, banking sources said. But after the breakdown of the lockdown, the number is 40 percent and below. For corporate sector public sector banks, this figure stands at 25 per cent.

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Sources said banks will discount the compound interest for the period of payment of the installment payment. For example, if a customer waives an installment payment for three months, their compound interest is waived for three months. The Reserve Bank last year exempted the payment of installments from March 1 to May 31, 2020 for all term loans due to the Kovid-19 epidemic. The period was later extended to August 31.

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Sources said the Supreme Court directive is limited to accounts that have taken advantage of the payment waiver. According to such estimates, public sector banks will lose less than Rs 2,000 crore. Meanwhile, the Association of Indian Banks (IBA) has written to the government, requesting the banks to cover the interest rebate. The government will take a decision on this after considering various factors.

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