SC waives Interest in Loan Moratorium Scheme

The Supreme Court of India has refused to interfere with the decision of the government and Reserve Bank of India (RBI) on the loan moratorium scheme declining to extend moratorium period of six-months.


The supreme court has also highlighted that the additional reliefs like total waiver of interest cannot be allowed because it will affect the depositors. The apex court also added that no interest on interest will be charged on the borrowers during moratorium period irrespective of loan amount. If any amount has been collected will be refunded.


The Supreme Court pronounced its verdict following a batch of pleas by several trade associations from the real estate and power sectors who were seeking an extension of the loan moratorium and other reliefs in light of the coronavirus pandemic. The bench headed by justice Ashok Bhushan had reserved the verdict on December 17, 2020.

Centre’s Take

The Centre had submitted in the court that, if it were to consider the waiving interest on all the loans & advances of all the categories of borrowers for six-month moratorium period, then the amount foregone will account for more than Rs 6 trillion. If banks were to bear the burden of this amount then, it would necessarily wipe out the substantial part of their net worth. It will also render most of the lenders unviable.

Loan Moratorium

Loan Moratorium is the period of time wherein the lenders do not have to pay an EMI on the loan they have taken. This period is also EMI holiday. Such breaks are offered to help the individuals who are facing the temporary financial difficulties to plan their finances in a better manner. In India, the Reserve Bank of India (RBI) had announced the loan moratorium scheme which allowed the lending institutions to grant the temporary relief to the borrowers in their installments of term loans amid the covid-19 pandemic. This was announced with the aim of providing the borrowers more time to pay their EMIs because of the economic fallout.




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