IBA reaches out to Govt for refund of compound interest waiver by banks
   Date :24-May-2021

IBA _1  H x W:
Business Bureau :
The Indian Banks’ Association (IBA) on behalf of lenders has approached the finance ministry to refund the burden fallen on their shoulders due to a recent Supreme Court judgment on the waiver of compound interest on all loan accounts which opted for moratorium during March-August 2020. The March judgment of the apex court directed the banks to waive off compound interest on loans above Rs 2 crore availing moratorium as loans below this got blanket interest on interest waiver in November last year.
Compound interest support scheme for loan moratorium cost the Government Rs 5,500 cr during 2020-21, and the scheme covered all borrowers including the prompt one who did not avail moratorium. Various banks are at the different stages of executing the order. Punjab & Sind Bank MD S Krishnan said the burden on the bank due to waiver works out to be around Rs 30 crore. The issue of reimbursement of the waiver amount by the government is being pursued by IBA on behalf of the banks, he said. Asked if the finance ministry has responded to their request, he said, "So far, we have not heard anything positive on this."
The apex court order this time is only limited to those who availed moratorium. So, the liability of the PSBs should be less than Rs 2,000 cr as per rough calculations, sources said. The RBI on March 27 last year announced a loan moratorium on payment of instalments of term loans falling due between March 1 and May 31, 2020, due to the pandemic, later the same was extended to August 31.