The Supreme Court on Wednesday directed the government and the Reserve Bank of India to review the loan moratorium issue and asked to create sector-wise schemes to suit their requirements. The apex court said customers who have availed loan moratorium should not be burdened with additional interest and that the government should interfere and not leave everything to be decided by banks.
The SC bench comprising Justices Ashok Bhushan, MR Shah and SK Kaul told the Centre that the purpose of the loan moratorium should have been to provide "benefit" to "customers purposefully". "Govt should consider interfering," the bench said, adding "once you fix a moratorium it should serve the purpose desired..we see no merit in charging interest on interest."
Solicitor General Tushar Mehta said moratorium meant "deferment" and that it would be difficult for banks to waive interest as they also have to pay interest to depositors. "Problem is that even banks have to pay interest to depositors. Therefore waiving interest is not easy," he said. Justice Bhushan said banks should not charge the deferred amount and additional interest during the moratorium period.
Senior Advocate Harish Salve, who represented banks, said the interest waiver plea was "premature". He said the issues would have to be tackled on a sector-to-sector basis. "We are still in a tunnel. Let's wait till we come out of this tunnel," he said. The SC bench reiterated: "We are only saying provide the waiver on interest on interest," said the bench.
The bench said the Centre should interfere and waive off additional interest. The matter has been deferred to August first week.
The RBI in an affidavit filed before the Supreme Court had already informed that it cannot waive interest on loans for the six-month moratorium period, as it would jeopardise the financial stability and health of the banking sector. The apex bank also told the court that it assessed the interest payable on these loans to be approximately Rs 2 lakh crore, which it would lose if it forwent the interest amount on loan repayments.
The RBI in May extended the moratorium on payment of all term loans by another three months till August 31. Before that, the central bank had allowed a three-month moratorium on payment of all term loans due between March 1 and May 31. The decision was announced following Centre's directions to the apex bank to ease the financial burden on the debtors in the wake of coronavirus-induced lockdown.