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Supreme Court asks RBI to ensure banks implement its COVID-19 three-month moratorium policy in letter and spirit

The Supreme Court also sought to know from Solicitor General Tushar Mehta whether or not the benefits implemented by the RBI for the lockdown period are being extended to borrowers.

Debayan Roy

The Supreme Court today asked the Reserve Bank of India (RBI) to ensure that it's loan moratorium policy permitting exemption from paying EMIs and other loans during the COVID-19 lockdown period is implemented by the banks.

The matter was heard today by a three judge Bench of Justices NV Ramana, Sanjay Kishan Kaul and BR Gavai.

The Supreme Court also sought to know from Solicitor General Tushar Mehta whether or not the benefits implemented by the RBI for the lockdown period are being extended to borrowers.

A batch of petitions by Anish Roy, Devesh Kumar Chauvia, Yashmaan Ghanshyam (all in-person) and Kamal Kumar Kalia through Advocate Sanju Jakob, was filed in the Supreme Court challenged the RBI's March 27 circular on the three-month moratorium permitted for loan repayments due to the economic impact of the COVID-19 pandemic.

However, the Supreme Court noted that it was not for them to interefere as the petitioner himself was not an aggrieved party.

Justice Kaul observed that the main purpose of Public Interest Litigation was lost.

"This is is not public interest. Lawyers keep filing petitions on what they feel is possible. This is not public interest. The whole concept of PIL is lost."

On March 27, the RBI had permitted all lending institutions to allow a three-month moratorium on payment of all kinds of instalments, including those for credit cards and for all term loans outstanding between March 1, 2020 and May 31, 2020.

A similar three-month deferment for all working capital loans to help borrowers face Coronavirus-related economic hardships was also permitted.

The petitions filed in the Supreme Court, however, pointed out that interest would continue to accrue during the three-month moratorium, which would additionally have to be borne by a customer if he/she chose to avail of the benefit.

The pleas stated that no interest should be charged during the moratorium, as citizens were facing “extreme hardship, whereby business and work have come to a halt and the entire market has crashed." It was further contended that there was no sense in paying additional interest along with the regular EMIs.

The primary concern before the three-judge bench today was whether any of the petitioners had a loan running in the case.

Advocate Shibshankar Saha, appearing for one of the petitioners, stated that though there were no loans running on the personal account of the petitioner, the plea was for the benefit of the "public at large."

However, Justice Ramana said personal hardship was important to determine locus in the case.

"We are not here to decide whether the scheme is profitable scheme, good scheme, bad scheme. If you're not a borrower, you don't know anything."

The Bench proceeded to dispose of all the four petitions, but asked RBI to ensure that it's scheme is implemented by the banks. The Court stated,

"We direct the Reserve Bank of India to ensure implementation of the Circular dated 27.03.2020 in its letter and spirit."

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