Lower rates permitted

The Madras High Court has allowed the administrator of RPS Benefit Fund to reduce the interest rate payable by the borrowers as an incentive to get in some money and make part repayment to the investors.

The court has permitted borrowers of mortgage and jewel loans to repay the principal with nine per cent simple interest. This facility would be available for repayments made before December 31, 2000.

The total outstanding mortgage and jewel loans are placed at Rs 9.24 crore with compound interest at 23.4 per cent to 30 per cent according to original terms of the loans. Borrowers who had availed jewel and mortgage loans on or before December 31, 1999 should pay the outstanding as of September 30, 1999 at the agreed rate. From this date to the date of repayment, the dues must be paid in one lump sum at 9 per cent interest.

Whether this incentive induces borrowers to pay up so that depositors can get some respite, remains to be seen. If it works effectively, a similar approach to numerous other beleaguered and broke finance companies may be on the cards.