NEW DELHI: The Supreme Court on Thursday granted time to Reserve Bank of India and the finance ministry to file a joint response on a plea seeking interest waiver during the moratorium period.
The three-judge bench, comprising Justices Ashok Bhushan, MR Shah and SK Kaul, said, “We know, economic aspect should not be higher than health of people."
The RBI had filed a counter affidavit on Wednesday saying it does not consider prudent to go for a forced waiver of interest as it would risk the financial viability of banks and put interests of depositors in jeopardy.
The central bank had on 22 May extended moratorium on term loans till 31 August amid the nationwide lockdown due to covid-19. In March, the central bank had allowed a three-month moratorium on payment of all term loans due between 1 March and 31 May.
On 26 May, the apex court had sought response of RBI on the plea seeking interest waiver on the moratorium on term loans.
Justice Bhushan identified two main issues in the matter -- first whether interest should be charged during the moratorium period and second whether interest should be charged on the accrued interest.
"There are two issues in this: no interest during moratorium period, and no interest on interest", said Bhushan.
Senior advocate Rajiv Dutta, appearing for the petitioner, while referring to the reply said, “cat is out of bag…They’re saying profitability of bank prime". “So only the banks should earn and rest of the country goes down under?" he added.
Solicitor General Tushar Mehta sought time to take instructions from the RBI and finance ministry and then file a joint reply. Dutta also sought time to file rejoinder to the counter affidavit filed by RBI. The three-judge bench granted time and the case will be next heard on 12 June.
The bench, which heard the submission through videoconferencing, also expressed its objection to the counter affidavit filed by RBI being published by media before it reached court.
As per petitioner Gajendra Sharma, 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.
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 and is simply a deferment of the payment to provide some relief to borrowers facing liquidity issues.