It is now near certain, that we will see a new class of waivers introduced into the Indian banking lexicon. The compound interest or ‘interest-on-interest’ waiver.
On Monday morning, the Supreme Court continued with hearings in the matter, after the Government of India filed an affidavit on Friday. In this affidavit, the government took a position that it is willing to waive compound interest for all borrowers with loan amounts less than Rs 2 crore. This would be applicable for MSME loans and retail loans across most categories. The affidavit also suggested that this relief would be applicable to all borrowers “irrespective of whether the borrower had availed of the moratorium or not.”
The proposal, subject to a final view taken by the Supreme Court, has generated much debate.
Do Nothing – The Rejected Option
Let’s first say that the ideal option would have been to reject calls…