Post lock down RBI announced that the March 27 circular announcing moratorium was later modified on April 17 and May 23 by which the moratorium period was extended by another three months that is from June 1 to August 31, 2020, on payment of all installments in respect of term loans (including agricultural term loans, retail and crop loans).
The Supreme Court on Thursday sought the Finance Ministry’s reply on a waiver of interest on loans during the moratorium period after the RBI said it would not be prudent to go for a forced waiver risking financial viability of the banks.
Supreme court said there are two aspects under consideration in this matter no interest payment on loans during the moratorium period and no interest to be charged on interest.
A bench of Justices Ashok Bhushan, Sanjay Kishan Kaul, and M R Shah said that these are challenging times and it is a serious issue as on one hand moratorium is granted and on other hand, interest is charged on loans.
The bench was hearing a plea, filed by Gajendra Sharma, in which he has sought a direction to declare the portion of RBI’s March 27 notification “as ultra vires to the extent it charges interest on the loan amount during the moratorium period, which creates a hardship to the petitioner being a borrower and creates hindrance and obstruction in ‘right to life’ guaranteed by Article 21 of the Constitution of India”.
Sharma, a resident of Agra, has also sought a direction to the government and the Reserve Bank of India (RBI) to provide relief in repayment of loans by not charging interest during the moratorium period.
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Solicitor General Tushar Mehta, appearing for the Centre, said that he would like to file the reply of the finance ministry on the issue and sought time.
[splco_quote]Senior advocate Rajeev Dutta, appearing for petitioner Gajendra Sharma, said that now the cat is out of the bag as RBI is saying the profitability of the banks is primary.[/splco_quote]
He referred to the recent order of the apex court in the Air India matter on booking of middle seats on the non-scheduled flights to bring the stranded Indians from abroad. The court had said that economic interest is not higher than the health of people.
Dutta said that by the submission of the RBI, it means that only banks should earn a profit while the rest of the country goes down during the pandemic.
The top court then asked the Solicitor General to file the response by June 12 and allowed the petitioner and other parties to file rejoinder by then.
On May 26, the top court had asked the Centre and the RBI to respond to the plea challenging the levy of interest on loans during the moratorium period.
The RBI in its reply has told the top court that it is taking all possible measures to provide relief with regard to debt repayments on account of the fallout of Covid-19 but it does not consider it prudent to go for a forced waiver of interest, risking the financial viability of the banks it is mandated to regulate, and putting the interests of the depositors in jeopardy.
“Therefore, the regulatory package is, in its essence, in the nature of a moratorium/deferment and cannot be construed to be a waiver, it has said.
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