RBI loan moratorium scheme: Why should credit card users get benefit? Supreme Court to Centre

The Supreme Court on Thursday asked the Central government why credit-card users should be entitled to the benefit of compound interest waiver under Reserve Bank of India's (RBI) loan moratorium scheme since they are not availing loans but only using the card to purchase goods. .This was after the Solicitor General Tushar Mehta, representing the Central government, told the court that credit card users would also receive ex-gratia payments.."I am a credit card user. I received SMS for ex-gratia payment," he said."Credit card users purchase things using the cards. They have not availed loans. They should not be given this benefit," the court remarked..The Bench of Justices Ashok Bhushan, R Subhash Reddy and MR Shah was hearing a batch of petitions relating to charging of interest on interest for borrowers who availed of the RBI's loan moratorium scheme, introduced in view of the COVID-19 pandemic. .RBI and the Union Finance Ministry had filed separate affidavits in the apex court saying that eligible borrowers will be entitled to get the difference between compound and simple interest collected on loans of up to ₹2 crore during the moratorium period. The said amount, it was stated, will be credited to the accounts of eligible borrowers before November 5 by banks, financial and non-banking financial institutions. .Scheme for compound interest waiver during loan moratorium period to take effect by November 5: Centre tells Supreme Court.The RBI had also informed the Court that it has asked all banks, financial and non-banking financial institutions to take "necessary actions" to ensure that the amount is given to eligible borrowers within the stipulated time. The Central government also submitted that the Finance Ministry had issued a scheme as per which lending institutions would credit this amount to the accounts of borrowers..On October 14, the apex court had observed that the Central government should implement "as soon as possible" the interest waiver on loans of up to ₹2 crore under the RBI's moratorium scheme..In March this year, the RBI had issued a circular which allowed lending institutions to grant a moratorium on payment of term loans that were due between March 1, 2020, and May 31,2020, due to the pandemic. Later, the moratorium was extended till August 31, 2020..Levying of interest on loan amount during RBI moratorium: Supreme Court issues notice to Centre and RBI, one week time to respond.During the hearing on Thursday, the Solicitor General told the Court that banks are obligated to transfer the compound interest waiver under RBI's loan moratorium scheme to eligible borrowers even without the borrower making such demand.Mehta submitted that it is the responsibility of banks to credit compound interest waiver for loans up to 2 crores and not for consumers to remind the banks of this scheme..Dr. Abhishek Manu Singhvi, representing power generating companies, submitted that the power sector is an essential and abused segment and prayed for tweaking of the circular to make it inclusionary so that the sector could avail the benefits of the scheme. ."A larger part of the borrowings cannot be restructured due to certain exclusions. A large part of the borrowings is by LIC. Moreover, the RBI circular provides for restructuring at the instance of the lender and not the borrower which defeats the purpose of the circular," he submitted..These loopholes need to be rectified by RBI. It needs to revisit the circular and make these changes, he added. .The Court, however, declined to pass any order instead asking Singhvi's client to make a representation before RBI. The case will be heard again next week.