Don't hide behind RBI, clarify your stand on loan moratorium: SC to govt

The top court had earlier said there was “no merit in charging interest on interest” for deferred loan payment instalments during the moratorium period, announced in wake of the Covid-19 pandemic
Pulling up the Centre for “hiding behind the Reserve Bank of India” (RBI), the Supreme Court on Wednesday asked it to clarify its stand within a week on the waiver of interest on loan repayments during the moratorium period. 


A Bench headed by Justice Ashok Bhushan said the government had failed to clear its position on the issue despite the fact that ample powers were available with it under the Disaster Management Act.


Solicitor General Tushar Mehta said, “My Lordships may not say that. We are working in coordination with the RBI.”


The Bench, also comprising Justices R Subhash Reddy and M R Shah, asked the solicitor general to clarify stand on the Disaster Management Act, and whether additional interest on the existing interest could be accrued.


Mehta argued that there could not be a common solution for all the problems.


Senior Advocate Kapil Sibal, appearing for the petitioner, informed the Bench that the loan moratorium’s deadline would end on August 31, and sought its extension. “I am only saying that till these pleas are decided, the extension should not end,” Sibal said.


The apex court has now posted the matter for hearing on September 1.


The top court had earlier said there was “no merit in charging interest on interest” for deferred loan payment instalments during the moratorium period, announced in wake of the Covid-19 pandemic.


The Bench was hearing a plea filed by Agra resident Gajendra Sharma, who has sought a direction to declare the portion of the RBI’s March 27 notification as “ultra vires to the extent it charges interest on the loan amount during the moratorium period, which creates hardship to the petitioner being borrower and creates hindrance and obstruction in ‘right to life’ guaranteed by Article 21 of the Constitution of India”.

Sharma has also sought a direction to the government and the RBI to provide relief in repayment of loan by not charging interest during the moratorium period.


On June 4, the apex court had sought the finance ministry’s reply on the waiver of interest on loans during the moratorium period after the RBI said it would not be prudent to go for a forced waiver of interest risking financial viability of banks. The court had said there were two aspects under consideration in this matter — no interest payment on loans during the moratorium period and no interest to be charged on interest. It said these were challenging times and it was a serious issue as on one hand, moratorium was granted and on the other, interest was charged on loans.


Bankers have been asking the RBI to not extend the loan moratorium period beyond August 31.


Earlier, HDFC Chairman Deepak Parekh had demanded that the payments moratorium be not extended, as even those who could afford to pay were exploiting the situation for financial gains, straining lenders.


Before that, SBI Chairman Rajnish Kumar had said that across the board, relief on payment of loan dues was not needed beyond August and he was expecting the banking regulator to take a more sectoral approach.


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