The Supreme Court on Tuesday said any amount collected during moratorium period by banks as interest on interest or compound interest, should either be refunded or adjusted against the next EMIs payable by the borrowers.
A bench comprising Justices D. Y. Chandrachud, M. R. Shah and Sanjiv Khanna pronounced the verdict. The top court said it could not understand the rationale behind waiving interest on interest on loans up to Rs 2 crore, and why this limit has been set by the government, has not been explained.
The top court said it would not get into the matters of trades and commerce and emphasized that judges are not experts on financial matters.
“Not for us to decide if public policy could have been better”, noted the top court. However, the apex court also rejected the petitioners’ prayer seeking extension of the 6-month loan moratorium period granted by the RBI in the backdrop of Covid-19 pandemic.
The top court stressed that the government cannot be directed to ask banks to waive off interest on loans during the period of lockdown.
The bench pronounced the verdict in the case of Small Scale Industrial Manufacturers Association vs Union of India.
“Economic and fiscal policies are not amenable to judicial review and merely because a sector is not satisfied with a policy decision…”, observed the top court. The judgment in the matter was reserved on December 17, 2020.