Litigation News

Moratorium on loan repayment amid COVID-19: Centre, RBI, Bankers Association coming up with a solution, Supreme Court told

Solicitor General Tushar Mehta told the Court today that the moratorium is capable of being extended for up to two years.

Shruti Mahajan

The Supreme Court adjourned to tomorrow the hearing in the case concerning the moratorium period for repayment of loans amid the COVID-19 pandemic.

The Court adjourned the hearing in order to peruse an affidavit filed by the Centre on the issue.

The Central government, through Solicitor General Tushar Mehta, told the Bench of Justices Ashok Bhushan, R Subhash Reddy and MR Shah today that the moratorium is capable of being extended by up to two years.

The submission was made in Court when an intervenor sought to make arguments for the extension of the moratorium beyond August 31.

In response, Mehta informed the Court that the moratorium is capable of being extended for up to two years. However, no formal decision has been taken on this aspect yet.

The Centre also stated that it has submitted an affidavit on the matter. The Court, which had not received the affidavit at the time of the hearing, proceeded to adjourn the hearing to tomorrow so that it can peruse the same.

Justice Ashok Bhushan added,

"Mr. Mehta, this Bench is not scheduled to sit tomorrow. We will sit tomorrow only to hear this case."

During the hearing today, SG Mehta also urged the Court to give the Centre time to come out with a solution on the issue.

"Please let Centre, RBI and the Bankers Association put our heads together", Mehta said.

The Court remarked,

"Since day 1, we have been asking you to come up with a mechanism."

To this, Mehta responded,

"The discussion has matured to some extent by now."

He also submitted,

"There are more issues involved, the economy is also stressed (referring to yesterday's GDP figures), this requires some extent of discussion... We are trying our best to solve the problems. There are some decisions that were taken and these decisions of August 6 are also mentioned in the affidavit."

The Court will resume its hearing in the matter tomorrow.

In the previous hearing, the Court had pulled up the Centre for not clarifying its stand on the issue of waiving interest on interest during the moratorium period. The Court had asked Centre to make its position known while observing that it appeared that the government was "hiding behind the RBI".

During the hearing in the case in June, the Court had asked the Centre and the RBI to review the move to charge interest on loan repayment during the moratorium period introduced in light of the COVID-19 pandemic.

The Indian Banks Association (IBA) was also asked to look into the possibility of evolving new guidelines to address the issue.

The Court had been considering the question of charging interest on those who avail the benefit of moratorium allowed by the RBI for deferred payment of term loans.

The Court had restricted the scope of the issue involved in the case and had said that it was not asking for a complete interest waiver, but waiver of interest accrued on the interest amount. It thus asked if banks can handle this limited burden.

In view of the COVID-19 pandemic, the RBI had issued a circular on March 27 allowing banks to grant a moratorium to borrowers on payment of instalments for a period of three months, which was later extended to six months. The RBI also made it clear that interest accruing on these loans for this period would be payable.

The part of the circular regarding charging of interest was challenged by some petitioners, who claimed that their monthly EMI payment will stand increased as a result.

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