The Supreme Court on Friday ordered the Finance Ministry and the Reserve Bank of India to hold a meeting within three days to decide on waiver of interest on interest for deferred payments of loan installments during the moratorium period, PTI reported.
Considering the economic impact of the lockdown imposed to fight the coronavirus crisis, the RBI had on March 27 said that banks would be permitted to grant a moratorium of three months on payment of all installments falling due between March 1 and May 31. On May 23, it said that banks can extend the moratorium until August 31.
The court, hearing a plea filed by a resident of Agra, said the question is not of waiver of complete interest for the entire moratorium period but is limited only to the interest banks charge on the original interest. The court said it is trying to take a balanced view of the matter.
“If interest payment has been deferred for three months, banks should not add that amount to the payable money and charge interest on interest,” the bench of Justices Ashok Bhushan, Sanjay Kishan Kaul and MR Shah said, according to NDTV. It then posted the hearing for next week.
Solicitor General Tushar Mehta, appearing for the Centre, told the Supreme Court that he has sought a meeting with the RBI on the matter. In response, the bench asked the Centre to file an affidavit on the decision made after the meeting with the central bank.
Borrower Gajendra Sharma, the petitioner, had argued that though there was a moratorium on loans, there was also accrual of interest. This had to be paid in bulk or monthly once the central bank lifts the moratorium period. Sharma sought a direction to the Centre and the RBI to provide relief in repayment of loan by not charging interest during the moratorium period.
The RBI had opposed a forced waiver of interest on loans, saying that this would threaten the financial viability of banks. On June 4, the Supreme Court sought the Finance Ministry’s response to RBI’s regulatory package charging interest rate on loans even during the three-month moratorium period.