The Supreme Court on Wednesday rebuked the central government for not making its stand clear on waiving interest on term loans during the moratorium period declared amid the coronavirus pandemic, reported Bar and Bench. The court asked the Centre to make its stand clear by September 1.
Considering the economic impact of the lockdown imposed to fight the coronavirus crisis, the RBI had on March 27 said that banks would be allowed to grant a moratorium of three months on payment of all instalments due between March 1 and May 31. On May 23, it said that banks can extend the moratorium until August 31.
However, the RBI had made it clear that interest accruing on these loans for this period would be payable. Some petitioners challenged the interest accrual and said their monthly instalment will stand increased as a result.
The bench of Justices Ashok Bhushan, R Subhash Reddy and MR Shah on Wednesday observed that the Centre was “hiding behind the RBI [Reserve Bank of India]” instead of making its own stand on the matter clear. The court said the authorities cannot focus on only business at a time when the country is reeling under a pandemic. “...This is not the time to think about business only,” said Justice Shah.
The court noted that the government cannot shrug off its responsibilities. “This happened because you locked down the entire country,” it said. “You have to tell us your stand on two things: disaster management act and if the interest on interest will be accounted for.”
Solicitor General Tushar Mehta, representing the government, told the court that the Centre was working in coordination with the Reserve Bank of India. “There cannot be a solution which is one-size fits all,” he added, according to NDTV. During a hearing in June, Mehta had sought time to consult the finance ministry.
Earlier, the RBI had informed the court that there cannot be an interest waiver during moratorium on term loan repayment. The central bank had said that such a move will put the banks at risk. It had said that its regulatory package introduced amid the lockdown was “in its essence in the nature of a moratorium deferment and cannot be construed to be a waiver”.