Loan moratorium can be extended by two years, govt, RBI tell SC
02 September 2020
The central government and the Reserve Bank of India (RBI) on Tuesday told the Supreme Court that the moratorium on loan repayment, which ended on 31 August, can be further extended by up to two years, clearing the uncertainty among borrowers stuck with bank loans.
Solicitor General Tushar Mehta told a three-judge bench led by Justice Ashok Bhushan that the RBI and banks are working out a solution, but a formal decision was yet to be taken.
Mehta also informed the court that a fresh affidavit by the centre and the RBI has been filed on the issue. "We are in the process of identifying the distressed sectors to vary benefits as per the impact of hit they have taken," he said.
"Please let the centre, RBI and Bankers Association put their heads together,” Mehta said.
Announced by RBI in March for three months, the loan moratorium allowed debtors to postpone payment of EMIs. It was extended to six months till 31 August 2020.
The moratorium, however, did not give borrowers any relief in interest payment as the government and the RBI maintained that a complete interest waiver was not possible as banks too had to pay interest to depositors.
Mehta said the government and the RBI are mindful of the economic stress in various sectors even as the Covid-19 related lockdown has caused a 23 per cent contraction of the economy.
Hearing petitions demanding waiver of interest, including interest on interest on the suspended EMIs during the moratorium the top court had earlier commented that there was no point in charging interest on interest.
The government and the RBI maintained that a complete interest waiver was not possible as banks too had to pay interest to depositors.
Responding to a PIL filed by Gajendra Sharma, RBI had told the court that forced waiver of interest on term loans would jeopardise the financial health and stability of banks and would also harm debtors' interests.
The bench, however, had said many customers didn't avail of moratorium as they knew they weren't getting any benefits.
Hearing the case on 17 June, the court had said everything can't be left to banks, and had asked the government to consider interfering on the issue of interest waiver for the loan moratorium announced in view of Covid-19 lockdown.
"Our limited concern is to ease the burden on borrowers during these trying times," it had said, adding everything can't be left to banks.
"Central government can't raise its hands in helplessness... After announcing moratorium, it can't now say it's between banks and customers. If you announced moratorium, you must ensure the benefits are given to customers purposefully," the bench had said.
The bench posted the case for further hearing on Wednesday.
"Mr Mehta, this Bench is not scheduled to sit tomorrow. We will sit tomorrow only to hear this case," the court said.