EMI moratorium: SC gives 3 days to Centre, RBI to decide on waiver of interest on loans

RBI RBI to decide on waiver of interest on loans, The Supreme Court on Friday asked Solicitor General Tushar Mehta to convene a meeting of the Finance Ministry and Reserve Bank of India to decide within three days if interest can be waived on the deferred loan payments during the moratorium period.

The government has announced a loan moratorium of six months as a relief measure for businesses and retail borrowers. However, banks were charging interest over the accumulated amount of interest during the period.

On Friday, the bench said that the question is not of a waiver of complete interest for the entire moratorium period but was limited only to the interest charged on interest by banks.

“We are doing the balancing. The only thing we are wanting is a wider measure. Our concern in these proceedings is only whether the interest that has been deferred for 3 months will be added to charges payable later and whether there will be interest on the interest,” the bench comprising of Justices Ashok Bhushan, Sanjay Kishan Kaul and M R Shah said.

“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 added.

The bench was hearing a plea filed by Gajendra Sharma, seeking a direction to declare the portion of the RBI’s March 27 notification “as ultra vires to the extent it charges interest on the loan amount during the moratorium period, which creates a hardship to the petitioner being a borrower and creates hindrance and obstruction in ‘’right to life’’ guaranteed by Article 21 of the Constitution of India”.

In its reply, the RBI said it would not be prudent to go for a “forced waiver of interest” risking the financial viability of the banks, following which the apex court had sought the Finance Ministry’s reply on waiver of interest on loans during the moratorium period.

The bench said that its query was very limited on “whether there can be a waiver of interest on interest”.
Meanwhile, sources in the finance ministry said that RBI is not in favor of any waiver. However, officials will discuss the matter again with the banking regulator and will go by what RBI suggests.

“We had sought time to give a response. The government is not in favor of any waiver. But we will go by what the RBI suggests, “ a senior finance ministry official said. The next hearing on the matter will be held on June 17.

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