While the Supreme Court's ruling that financial institutions cannot be forced to continue the moratorium on loan repayments allowed during the Covid period may disappoint a good percentage of loan beneficiaries but it is very good for the survival of banks and others. Following the imposition of the lockdown, financial institutions froze the repayment of loans on the instructions of the central government in view of the severe financial crisis. The deadline was August. The relief of the delay in repayment did not last long. Even during the moratorium, interest rates on loans continued to rise as compound interest and penalty interest.

Now, the apex court has directed the companies which have levied compound interest and penalty interest to repay it. During the six months of the moratorium, loans will not be charged a single penny more than the pre-determined interest. The court ruled that the repayment could be rearranged by adding the interest during the moratorium period to the monthly installment. At the same time, there is a decision to provide relief to the banks. The order states that financial institutions can take legal action to recover the arrears if they remain unpaid. There are many people who refuse to repay their loans even after the moratorium period. Those who expect that the government would announce concessions in view of the ongoing Covid crisis is reluctant to repay. Those who refuse to repay the loans will be have pay the price as Banks can now take steps to recover non-performing loans.as per the Supreme Court order.

The country's banks already has to get back about Rs 7.5 lakh crore, which was loaned out to many persons. If moratorium loans are also added to this, it will rise to Rs 8.7 lakh crore. This will even affect the healthy survival of the banks. The Supreme Court has ruled in favor of extending the moratorium on a number of petitions. There is a tendency in the country to use the moratorium as a shortcut to gain people’s mandate. Writing off loans is also part of it. It is a long-standing arrangement that the bigwigs are able to take huge loans through political interventions. The big businessmen who have recently defrauded the banks in this manner are now leaving a lavish life abroad.
The government has to spend big moneyto bring them back.

Banks were actually getting ready to levy Rs 14,000 crore towards compound interest and penalty on loans during the Covid period. It had to be abandoned following a court order. For borrowers, the fact that they don’t need to pay additional interest or compound interest is a big relief.
Penalty interest and compound interest are unbearable for ordinary borrowers. Most people are careful not to default EMIs or repayment in any way as failure to repay the loan will adversely affect further loans. Default is made only when there is no money at all to make repayment.