Set up a reimbursement policy for “interest on interest” invoiced during the moratorium: RBI to banks
The RBI on Wednesday called on banks and NBFCs to immediately put in place a board-approved policy to repay / adjust “interest on interest” charged to borrowers during the six-month moratorium, in accordance with the court ruling supreme last month.
As part of the COVID-19 regulatory package, the RBI had authorized credit institutions to grant a moratorium on the payment of maturities of term loans maturing between March 1 and May 31 of last year. The moratorium has been extended for three months until August 31.
Referring to the Supreme Court ruling dated March 23, 2021, the RBI in a circular said on Wednesday: “All credit institutions must immediately put in place a policy approved by the Council to repay / adjust interest” on interest “charged to borrowers during the moratorium period, that is to say from March 1, 2020 to August 31, 2020 …” The Supreme Court had ordered that no compound or penal interest be charged for the moratorium month announced last year amid the COVID-19 pandemic and the amount already recovered must be repaid or adjusted in the next installment of the loan account.
The RBI further stated that in order to ensure that the judgment is implemented in a uniform manner in letter and spirit, the methodology for calculating the amount to be repaid / adjusted for the various facilities should be finalized by the Indian Banks Association (IBA) in consultation with other industry participants. / organizations, which ” will be adopted by all credit institutions ”.
The “relief will apply to all borrowers, including those who benefited from working capital facilities during the moratorium period, whether or not the moratorium has been fully or partially used,” the circular said on ” Classification of assets and income Recognition following the expiration of the Covid-19 ‘regulatory package.
The central bank also said that lending institutions should disclose the total amount to be repaid / adjusted to their borrowers based on the reliefs in their financial statements for the year ending March 31, 2021.
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