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RBI circular on loan moratorium: Supreme Court asks Solicitor General to convene meeting with RBI and Finance Ministry officials

Shruti Mahajan

The Supreme Court today asked Solicitor General Tushar Mehta to convene a meeting with officials of the Reserve Bank of India (RBI) and the Ministry of Finance to discuss the circular on a moratorium on repayment of term loans during the COVID-19 period. (Gajendra Sharma vs Union of India)

The Bench of Justices Ashok Bhushan, Sanjay Kishan Kaul, and MR Shah today summarised the issue in question to point out that the main concern is whether interest can be charged on loans when a moratorium on repayment has been granted.

"Our concern is when you have deferred loan for three months then how can interest of these 3 months be added to the capital?"
Justice Ashok Bhushan

SG Mehta told the Court that some time was needed for a reply to be filed. The Court, however, pointed out that a reply on behalf of the RBI has already been filed before the Court. Justice Kaul also stated that the RBI's reply went over and beyond the question involved.

"RBI went beyond what was asked... We never said waive off full interest."
Justice Sanjay Kishan Kaul

At this stage, Mehta told the Court that he needed to hold a meeting with the officials of RBI and the Finance Ministry. Agreeing to this suggestion, the Court directed for this meeting to be held over the course of the coming few days. The case is now listed for hearing on June 17.

The Court recorded Mehta's submission in this regard in its order said,

"Mr. Tushar Mehta, learned Solicitor General submits that he has convened a meeting with the Finance Ministry and RBI during the weekend. He seeks time to obtain further instructions. Let the needful be done within three days."

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.

On the issue of the interest component, the RBI made its position clear and placed an affidavit before the Court stating that it would not be appropriate to go for forced waiver of interest keeping in view the financial health of banks as well as the interest of the depositors.

Read Order:

Gajendra Sharma vs UOI - 12.06.2020.pdf
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