Loan moratorium: Supreme Court directive to Centre, RBI

Central to the challenge in petition is RBI notification of March 27.

The Supreme Court on Tuesday directed the Central government and the Reserve Bank of India to file their formal response to a petition challenging the charging interest rate on loans even during the three-month moratorium declared amid the COVID-19 pandemic and national lockdown.

A Bench led by Justice Ashok Bhushan issued formal notice to the central banker and the Centre. The court asked them to file their counter affidavits within a week.

Solicitor General Tushar Mehta also submitted that he would take instructions on the issue and respond to the court in the next hearing.

The petitioner, Gajendra Sharma, said though there was a moratorium on loans, there is also accrual of interest, which had to be paid in bulk or on a monthly basis after the lifting of the three-month embargo on May 31 – recently extended to August 31. This is akin to taking away with one hand what was given by the other hand.

Also read: Supreme Court directive to RBI on loan repayment moratorium

The court wanted to know why the government and the RBI seemed to think that natural justice was not violated when “the government on one hand ceased the working of individuals and on other hand is asking to pay the loan interest during moratorium”.

Central to the challenge in the petition is the RBI notification of March 27.

“The interest charged during moratorium period would be added up into the EMIs at the end of three-month forbearance. It will have to be paid in one go or be equally divided in all future EMIs. The monthly bill for customers will increase… In the present scenario, when all the means of livelihood has been curtailed by the Government of India by imposition of lockdown and the petitioner has no way to earn a livelihood, the imposition of interest will defeat the very purpose of permitting moratorium on loans,” the petition contended.

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