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NEW DELHI: The Supreme Court on Wednesday directed the Centre and Reserve Bank of India (RBI) to review the moratorium scheme on term loans and create tailored schemes for various sectors, including agriculture.

“The central government can't raise its hands in helplessness. It can’t say now that it is between banks and customer," the apex court bench, headed by Ashok Bhushan, said. It was the Centre's duty to ensure that “benefits are given to customer purposefully", the bench added.

The three-judge bench, also comprising Justices Sanjay Kishan Kaul and MR Shah, deferred hearing in the case till the first week of August.

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 from paying EMIs and other loans on payment of all term loans due between 1 March and 31 May.

The court also sought clarity on the question on whether the Indian Banks' Association can come up with new guidelines.

The court observed that customers were not availing the moratorium as they are aware that there are no benefits for them. It also observed that despite the fact that the Centre took time to respond and to find a way out, nothing has happened.

The Indian Bank Association and the State Bank of India sought to defer hearing in the case for three months. Banks submitted that by that time they will know the burden of moratorium on then.

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.

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.

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