The Indian government has told the Supreme Court it will waive certain interest levies on loans up to Rs. 20 million ($272,888) under a COVID-19 support plan, a legal filing showed, in a move that will bring relief to millions of borrowers.
An Indian optician from the northern city of Agra had challenged the plan which allowed skipping repayments for six months but levied an additional “interest-on-interest” on delayed payments which borrowers called unfair.
Other borrowers, such as real estate companies and power utilities, also challenged the plan.
In a filing on Oct. 2 with the Supreme Court, seen by Reuters, the government said it had decided to waive the compounding interest component on small-business and some other loans related to education and housing, and credit card dues.
“The government bearing this burden would naturally have an impact on several other pressing commitments being faced by the nation, including meeting direct cost associated with pandemic management,” the filing added.
It did not estimate the impact on the banking sector from the move but said if it were to consider a complete waiver of interest payments over a six-month period, as some had sought, it would cost the sector Rs. 6 trillion ($82 billion).
Ganjendra Sharma, the Indian optician who filed the first case in the Supreme Court, applauded the decision.
“I am happy millions of people won today,” he told Reuters.
