Mumbai: The RBI has asked all lenders to compensate borrowers with interest on interest charged between March 1, 2020 and August 31, 2020. This will apply to all borrowers irrespective of whether the moratorium had been fully or partially availed, or not availed.
Earlier, the Indian Banks Association (IBA) had asked banks to refund interest on interest to those who have been charged. This followed an order by the Supreme Court on March 23 this year in a case filed by borrowers seeking interest relief. Even before the order, the government had said that it would compensate lenders for refunding interest on interest on small loans below Rs 2 crore, which has already been done. The new directive applies to all loans.
In a circular to all lenders, the RBI said that all lending institutions must immediately put in place a board-approved policy to refund/adjust the interest on interest charged to the borrowers during the moratorium period. The method for calculation of the refund amount would be provided by the IBA.