SC seeks Centre reply on charging of interest on deferred loan payments
NEW DELHI : The Supreme Court on Wednesday took exception to the central government’s reluctance to clarify its stand regarding levy of interest by banks on loans and charging interest on such interest during the moratorium period afforded for loans by the Reserve Bank of India (RBI) from March to August in view of Covid -19 pandemic.
An apex court bench, headed by Justice Ashok Bhushan, said that plight of people due to Covid-19 and the resultant nationwide lockdown restrictions should be considered by the Central government while taking a call on the issue and ordered the government to file a separate affidavit.
“The problem was created by your lockdown. Now you cannot look into business (of banks) alone. You should make your stand clear instead of hiding behind RBI,” the bench said after solicitor general Tushar Mehta told the court that the Centre’s stance is the same as that of RBI.
Earlier in June, RBI had filed an affidavit before the SC stating that it would not support the move to waive off interest, as it could affect the financial viability of banks.
“RBI does not consider it prudent or appropriate to go for a forced waiver of interest, risking the financial viability of the banks it is mandated to regulate, and putting the interests of the depositors in jeopardy,” the banking regulator had told the apex court.
Mehta told the court on Wednesday that the RBI as the banking regulator will take a call on the issue and the centre will go by the RBI’S decision.
“You should make your stand clear instead of relying on RBI,” Justice MR Shah, who was part of the bench, told Mehta.
“Government of India has ample powers under the Disaster Management Act, 2005, to take a decision. You should clarify two issues: whether interest can be charged and whether interest on interest can be levied,” Justice Bhushan said.
The court adjourned the matter for further hearing on September 1 prior to which the Centre has to file its response. The moratorium announced by RBI expires on August 31.
The petition, which was filed by Gajendra Sharma, an Agra resident, had demanded a waiver on interest charged by banks citing the relief announced by RBI on the payment of equated monthly instalments (EMIS) between March and August 31 due to the pandemic.
Petitioner Sharma specifically cited RBI’S March 27 and May 22 notifications announcing a moratorium on loan repayments while permitting banks to levy interest. The notification to the extent of allowing levy of interest was challenged by Sharma.
“The imposition of interest (by banks) during the moratorium period is devastating and wrong,” he had submitted before the apex court.