Supreme Court wants Center to respond to plea for waiver of interest on loans during moratorium
New Delhi:
The Supreme Court today asked for a response from the Minister of Finance on the waiver of interest on loans during the moratorium after the RBI said it would not be prudent to use a “forced waiver of interest” risking the financial viability of banks.
The Supreme Court said that there were two aspects under consideration in this case – no interest payments on loans during the moratorium period and no interest payable on interest.
A bench of judges Ashok Bhushan, Sanjay Kishan Kaul and MR Shah declared that these times were difficult and that it was a serious problem because on the one hand a moratorium is granted and on the other hand interest is charged on the loans.
The bench heard a plea, filed by Gajendra Sharma, in which he requested an instruction to declare that part of the RBI notification of March 27 “as ultra vires in so far as it charges interest on the amount of the loan during the period of moratorium, which create difficulties for the petitioner who is a borrower and obstructs and hinders the “right to life” guaranteed by article 21 of the Constitution of India “.
Mr. Sharma, a resident of Agra, also asked the government and the Reserve Bank of India (RBI) to provide him with relief for the repayment of the loan by charging no interest during the moratorium.
Solicitor General Tushar Mehta, representing the Center, said that he wanted to table the Department of Finance’s response on the issue and asked for time.
Lead lawyer Rajeev Dutta, who represents petitioner Gajendra Sharma, said the cat is out of the bag now, as RBI says bank profitability is paramount.
He referred to the recent trial court order in the Air India case regarding the reservation of intermediate seats on non-scheduled flights to bring stranded Indians from abroad. The court had declared that the economic interest is not superior to the health of the people.
Dutta said that, according to the RBI’s submission, this means that only the banks should make a profit while the rest of the country declines during the pandemic.
He stated that the petitioner wished to file a reply to the response filed by the RBI.
Mehta said he would consult with the Ministry of Finance and try to find a solution to the two questions posed by the bench and table an answer to them.
The Superior Court asked the Solicitor General to file his response no later than June 12 and allowed the applicant and the other parties to file a reply by then.
At first, the district court noted that RBI’s response had been leaked to the media before the matter was considered by the court. “Does RBI file the answer first in the media and then in court?”
Dutta said it was an initiative to sensationalize the problem.
The bench said it strongly depreciates this practice and that it should not happen again.
On May 26, the Supreme Court asked the Center and the RBI to respond to the plea to challenge the collection of interest on the loans during the moratorium.
In response, the RBI told the supreme court that it is taking all possible steps to alleviate debt repayment due to the fallout from Covid-19, but does not consider it prudent to opt for a “forced waiver to interests “. , jeopardizing the financial viability of the banks it is responsible for regulating and jeopardizing the interests of depositors. “
In response, the RBI stated that the regulatory package is, in essence, in the nature of a moratorium / adjournment and “cannot be construed as a waiver”.
“While the Reserve Bank is taking all possible measures to alleviate the real sector with regard to debt repayment due to the fallout from Covid-19, it does not consider it prudent or appropriate to request a forced interest waiver, risking the financial viability of the banks it is responsible for regulating and endangering the interests of depositors, “said the Reserve Bank in its affidavit.
He said that the Reserve Bank’s mandate for regulating banks is guided by considerations of protecting depositors’ interests and maintaining financial stability, which also require that banks remain financially sound and profitable.
The RBI said that the March 27 circular announcing a moratorium was later amended on April 17 and May 23, by which the moratorium period was extended for an additional three months, from June 1 to August 31, 2020, on payment of all installments as a term. loans (including agricultural term loans, personal and crop loans).
“It is alleged that the regulatory waivers authorized by the Reserve Bank of India update the aforementioned circulars dated March 27, 2020, which were subsequently amended on April 17, 2020 and May 23, 2020, in order to to ease the burden of debt service brought on by disruptions due to the Covid-19 pandemic and to ensure the continuity of viable businesses. “
“Therefore, the regulatory package is, in essence, in the nature of a moratorium / adjournment and cannot be interpreted as a waiver,” he said.
The RBI said that in order to improve the difficulties faced by borrowers in repaying the interest accumulated for the moratorium period, it announced on May 23 that with regard to working capital, credit institutions could, at their discretion, convert the interest accrued for the deferment period until August 31, 2020 into a capitalization term loan (FITL) repayable no later than March 31, 2021.
(With the exception of the title, this story was not edited by GalacticGaming staff and is published from a syndicated feed.)
