Moratorium on loans: SC gives 3 days to FinMin, RBI to decide on interest

The Supreme Court on Friday asked the finance ministry to hold discussions with the Reserve Bank of India (RBI) and other stakeholders over charging interest on loans under moratorium, and file an affidavit in three days.

Setting June 17 as the next date of hearing, a Bench of Justices Ashok Bhushan, S K Kaul and M R Shah said it will limit the petition to banks charging interest on unpaid interest and not waiver.

Solicitor General Tushar Mehta, appearing for the Centre, said he had sought a meeting with the RBI. The Bench said if the RBI reply “goes much beyond the query posed by us there will be a lot of opinions on it. Our query is very limited on whether there can be waiver of interest on interest”.

On March 27, the RBI had announced a three-month moratorium on all term loans in view of the Covid-induced lockdown and related disruptions. It was later extended to three more months, till August 31.

The Bench was hearing a plea challenging levy of interest on loans during the moratorium. The plea, filed by Agra resident Gajendra Sharma, has sought a direction to declare a portion of the RBI’s March 27 notification as “something beyond the RBI’s legal power or authority, to the extent that it charges interest on the loan amount during the moratorium period”, which creates hardship to the borrower and creates hindrance and obstruction in ‘right to life’ guaranteed by Article 21 of the Constitution of India.

In its last hearing on June 4, the SC had said charging interest during the moratorium was “detrimental”. That came a day after the RBI told the apex court that a waiver of interest will impact the financial viability of the country’s financial sector and that the banks could forego about Rs 2 trillion in income if interest was waived off.