NEW DELHI :
The Reserve Bank of India (RBI) while filing counter affidavit in the Supreme Court on Wednesday stated that the plea for waiver of interest during the moratorium period would risk the financial stability of the bank and shall put the interests of the depositors in jeopardy.
The RBI had on 22 May extended moratorium on term loans till 31 August. In March, the central bank had allowed a three-month moratorium on payment of all term loans due between 1 March and 31 May.
The RBI submitted in their reply that the RBI circulars objective was of mitigating the burden of debt servicing brought about by disruptions on account of Covid-19 pandemic and to ensure the continuity of viable businesses. “Therefore, the regulatory package is, in its essence, in the nature of a moratorium/ deferment and cannot be construed to be a waiver," said RBI in its reply.
The RBI has cleared its stand in its counter affidavit that it does not consider prudent not 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.
As per the 27 March RBI circular, banks and other financial institutions are permitted to provide a moratorium of three months for all term loan installments which are due for payment between 1 March and 31 May. Term loans will include all kinds of retail loans such as vehicle loan, home loan, and personal loan, agricultural term loans as well as crop loans. The central bank has clarified that credit card dues will also be eligible for the moratorium. The moratorium will be provided for both interest as well as principal repayment, which means the moratorium is on your entire EMI.
Moratorium basically means you don't have to pay your EMIs for that time period and no penal interest will be charged. It is not a concession of any kind and is simply a deferment of the payment to provide some relief to borrowers facing liquidity issues.
Petitioner Gajendra Sharma said during the three-month period the interest would continue to accrue during the moratorium, which ultimately the borrower would have to pay. The petitioner argued that no interest should be charged during the moratorium because people are facing “extreme hardship". The petition also stated that paying additional interest on top of regular EMIs would be difficult.