The Centre had told the court that waiving interest on all loans for the six-month moratorium would mean forgoing more than Rs 6 lakh crore. In its loan moratorium Supreme Court ruling of 23 March 2021, in Small-Scale Industrial Manufacturers Association v Union of India, the court did not order such a waiver.
The court has directed that no compound interest, interest‑on‑interest or penal interest be applied to instalments that fell due between 1 March and 31 August 2020, no matter how large the loan was. Therefore borrowers who had already paid these charges are now given relief on that part.
The full waiver of interest for that period was not granted because banks still have to pay interest to depositors and pensioners.
What the 2020 moratorium actually did
Many borrowers had understood the moratorium to mean that their loan payments were being waived, but RBI circular of 27 March 2020 did not say so. It covered instalments falling due from 1 March to 31 May 2020, including EMIs, principal, interest and credit card dues.
During the deferment, interest kept piling up on the outstanding balance of term loans and it was due for payment when the period finished. Those who chose it were simply shifting the payments to a later date.
In its reply to a public interest petition filed by Gajendra Sharma in June 2020, the RBI said the moratorium only deferred payments and was not a waiver.
Lenders were allowed to give the moratorium, but they didn't have to. A borrower could not ask for it as a right under the circular.
Where relief stands now
The COVID era rules are no longer in force, and the 2020 window was the final one.
In the older RBI norms for housing loans, a repayment holiday was allowed at the borrower's option, or till construction was completed or 18 months from the first disbursement, whichever came earlier.
The restructuring framework is applied on a case‑by‑case basis and requires the lender's approval, so it is not a window that every borrower can tap into. The RBI pages that contain these provisions are undated.
