On Friday, during the hearing of a plea that raised a question for charging of interest on interest for loan repayments during the moratorium period, the Centre told the Supreme Court that “It is not possible to give more relief to different sectors amid the novel coronavirus pandemic.” It further stated that the courts should not interfere in fiscal policy.
Last week, the Centre had informed the top court that it has taken a decision to waive ‘interest on interest’ on loans up to Rs 2 crore in eight categories during the six-month moratorium period. The categories of loans up to Rs 2 crore include MSME loans, education loans, housing loans, consumer durable loans, credit card dues, auto loans, personal loans to professional and consumption loans.
However, on Monday, the bench comprising of Justices Ashok Bhushan, R. Subhash Reddy, and MR Shah noted that the affidavit filed by the Centre, mentioning the waiver of interest-on-interest on loans up to Rs 2 crore in eight categories, does not give details sought by court order on 10th September. It also observed that no consequential notification, circulars have been issued either by the RBI or by the Centre, to implement the waiver of the interest-on-interest scheme.
Thus, on 5th October, the apex court sought for an additional affidavit from the Centre for banking regulator detailing the steps taken to deal with the grievances of borrowers with respect to waiver of interest during the moratorium. The Court had also directed for the Kamath Committee report – which deals with sector-wise relief for COVID-19 related stress caused to the borrowers – to be placed on record.
Subsequently, in an additional affidavit, the government has today stated that “Policy is the domain of the government and court should not go into sector-specific financial relief. Any further relief, besides waiving of compound interest for loans up to Rs 2 crore, is detrimental to the national economy and banking sector.”
Further, the matter has been scheduled for the next hearing on Tuesday 13th October.
The Reserve Bank of India (RBI) had announced the loan moratorium to help borrowers combat the impact of the COVID-19 pandemic. However, banks are charging interest on installments that were deferred during the moratorium period.
