Banks Told To Credit ''Interest On Interest'' To Borrowers, RBI Tells Supreme Court

Banks, financial and non-banking financial institutions have been asked to take “necessary actions” to credit into the accounts of eligible borrowers by November 5 the difference between compound and simple interest collected on loans of up to ₹ 2 crore during the moratorium scheme, RBI has told the Supreme Court.

The Reserve Bank of India (RBI), in an affidavit filed through Assistant General Manager Prasanta Kumar Das, referred to the October 23 additional response of the Ministry of Finance and said the central bank has also acted in pursuance of that by issuing a notification to banks and FIs recently on refund of extra money to the borrowers.

The central government had earlier told the top court that lenders have been asked to credit into the accounts of eligible borrowers the difference between compound and simple interest collected on loans of up to ₹ 2 crore during the RBI’s loan moratorium scheme by November 5.

“All Primary (Urban) Cooperative Banks/State Cooperative Banks/District Central Cooperative Banks, All All India Financial Institutions and All Non-Banking Financial Companies (including Housing Finance Companies) to be guided by the provisions of the scheme and take necessary actions within the stipulated timeline therein,” the RBI said in its recent affidavit.

The top court is scheduled to hear a batch of PILs including the one filed by Gajendra Sharma on October 3 relating to charging of interest on interest by banks on EMIs which have not been paid by borrowers after availing the loan moratorium scheme of RBI during March 1 to August 31.