Pressure on Centre, RBI over loan moratorium
The Supreme Court is scheduled to hear the matter on 1 September.
Pressure is mounting on the Centre and the Reserve Bank of India (RBI) to extend loan moratorium for a few more months, even as the Supreme Court, which is hearing a petition in this regard, is scheduled to hear the matter on 1 September. The moratorium is ending on 31 August.
This is to be noted that in March, the RBI had allowed a three-month moratorium on payment of all term loans due between 1 March 2020 and 31 May 2020, which in May was extended by another three months till August to provide muchneeded relief to borrowers whose income has been hit due to the Covid-19 pandemic. The Federation of Hotel and Restaurant Association of India (FHRAI) has written to Finance Minister Nirmala Sitharaman and RBI Governor Shaktikanta Das, seeing extension of the moratorium. The Federation has said that the hotel industry has made no progress in terms of bookings even after several states unlocked and where hotels resumed operations. It has also said that wherever hotels and restaurants have opened, the footfalls are negligible.
Apex transporters body– All India Motor Transport
Congress (AIMTC)–HAS urged the RBI to extend the moratorium on payment of loans for the road transport sector till 31 December, saying the sector was reeling under acute financial crisis. “The critical condition of the road transport sector is impacting more than 20 crore people, directly and indirectly,” the AIMTC said in a letter to the RBI Governor. Urging the RBI to extend the moratorium on payment of loans, it said after the extension of current moratorium period till 31 August, most of the transporters are merely breaking even.
Similar request has been made by the Confederation of Real Estate Developers of India (CREDAI), Maharashtra unit, saying that its builders might be in default on 1 September once the moratorium period ends.
Hearing a petition, the Supreme Court this week asked the Centre to reply within a week on the issue of interest being charged on instalments which have been deferred under the RBI’S scheme during the moratorium period.
The court had earlier asked the Centre and the RBI to review the move to charge interest on EMIS during the moratorium period introduced under the scheme.
There are ample powers available with the Central government under the Disaster Management Act, a bench headed by Justice Ashok Bhushan said in a hearing conducted through video conferencing. The Centre has not made its stand clear so far.
“We are working in coordination with the RBI,” Solicitor General Tushar Mehta said and sought a week’s time for filing response. The SC has now posted the matter for hearing on 1 September.
The bench was hearing a petition filed by Agra resident Gajendra Sharma, seeking a direction to declare the portion of the RBI’S 27 March notification “as ultra vires to the extent it charges interest on the loan amount during the moratorium period, which create hardship to the petitioner being borrower and creates hindrance and obstruction in ‘right to life’ guaranteed by Article 21 of the Constitution of India”.
Sharma has also sought a direction to the government and the RBI to provide relief in repayment of loans by not charging interest during the moratorium period. The Supreme Court had said there were two issues under consideration: no interest payment on loans during the moratorium period and no interest to be charged on interest.