Plea in SC challenging RBI circular on 3-month moratorium on loan repayment

A petition was filed in the Supreme Court on Saturday seeking direction on setting aside the RBI's March 27 circular on three-month moratorium on loan repayment between March 1 and May 31 amid coronavirus pandemic.

The Reserve Bank of India (RBI) had issued the circular giving liberty to all banks and financial institution to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, subject to the borrower making such a request.

It had said that repayment schedule for such loans as also the residual tenor would be shifted across the board by three months after the moratorium period.

Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period, the RBI had said.

The plea, filed in the apex court by advocate Amit Sahni, has alleged that the RBI circular is an "eyewash as it provides that the interest shall be chargeable during the moratorium period and it makes no sense in paying additional interest along with the regular EMIs".

It sought a direction to the Centre and the RBI to clarify that any interest and accumulated interest on outstanding amount shall not be charged from the borrower for the moratorium period by any bank and financial institution.

It also sought directions to the government and the RBI to "appropriately consider extending the moratorium period for certain period so as to enable millions of persons, who may get unemployed due to Covid-19 health emergency for some time even after lockdown".

"The purported relief proclaimed to have been given by the respondents (Centre and RBI) vide circular dated March 27, 2020 is incomplete as the same does not provide interest relaxation to citizens and those who avail moratorium of three months shall have to pay interest on the same subsequently," the plea said.

It said that Covid-19 has impacted each and every segment of society and its consequences would be far more serious even after lifting of the ongoing lockdown and in such a situation, the government and the RBI are "duty bound to support its citizen".