Supreme Court questions RBI on order of levying interest on loans during moratorium

SC seeks joint response from Finance Ministry and RBI

The Supreme Court on Thursday(June 4) questioned the RBI for levying interest on loans during the period of moratorium, saying it would be detrimental to the people.

The court also pointed out that the economic aspect is not higher than the health of people.

A bench of Justices Ashok Bhushan, Sanjay Kishan Kaul, and M R Shah expressed its displeasure on the way the RBI treated the persons who had taken loans and wanted a waive off on the rate of interest during this moratorium period in the times of COVID-19 pandemic.

"These are challenging times. It is a serious issue as on the one hand moratorium is granted and on the other hand, interest is charged on loans," the court said.

On Wednesday (June 3), in a reply to a PIL filed by Gajendra Sharma, the RBI has told the court that its decisions granting a moratorium on loan repayment was only to "defer the payment obligations and it cannot be construed to be a waiver".

The banking regulator declined to grant any "forced" interest waiver on loan moratorium, saying it would risk not only the financial viability of the banks but would also put the interests of the depositors in jeopardy. Further, it would hurt banks by as much as Rs 2 lakh crore (1% of GDP).

On Thursday, the court asked Solicitor General Tushar Mehta to file a joint affidavit by June 12 as he said a meeting would take place on officials of the Union Finance Ministry and the RBI to discuss the matter.

The court also said there were two aspects of charging of interest on the loan during the moratorium and no interest in interest.

Sharma's counsel senior advocate Rajeev Dutta said the cat was out of the bag as the RBI's affidavit showed that banks should continue to earn even though the rest of the country went down under. He also sought permission to file a rejoinder.

The court also ticked off the RBI for leaking the affidavit in media a day before the hearing in the matter.

Circulars were issued on March 27, April 17 and May 23 by the RBI for an initial three-month moratorium period on loan repayment which now stood extended till August 31.