NEW DELHI: The Supreme Court on Wednesday came down heavily on the Centre for dithering on whether to waive interest on loans during the repayment moratorium period, which ends on August 31, or if banks should be barred from charging interest on interest accrued on the deferred EMIs.
“This is not the time to think about the business of banks only. The government must consider the sufferings of burrowers also,” a bench of Justices Ashok Bhushan, R S Reddy and M R Shah said, referring to the Reserve Bank of India’s June 3 affidavit opposing waiver of interest on the ground that it would adversely affect depositors and the banking business.
The bench took exception to the long delay on the Centre’s part in filing its promised affidavit on the issue and said the government would do well not to hide behind the RBI. The SC posted the matter for further hearing on September 1, but asked the Centre to file its affidavit in three days.
Solicitor General Tushar Mehta, who in June had promised to get back to the SC after consulting the finance ministry on the RBI’s stand, said, “The stands of the Union of India and the RBI are not different. The RBI and the government are working together to ameliorate the hardships faced by borrowers due to lockdowns caused by the pandemic. A fresh decision has been taken by the RBI on August 6 for a focussed sectoral approach for different categories of borrowers instead of one size fits all.”
However, the bench disapproved of the government’s lethargy in exercising its powers under the Disaster Management Act to present a clear picture to borrowers — whether interest during the moratorium period could be waived or interest should not be charged on the interest accrued on deferred payment of EMIs during the moratorium period.
Referring to the SG’s reference to the RBI’s new sectoral approach, the bench said, “That will not serve the purpose. The RBI is confusing the matter. The Union of India appears to be hiding behind the RBI. It has enough powers under the DM Act to take a decision. If you want to take a decision, take it and file it before us in three days. The matter has been hanging for quite some time.”
Three months ago, the SC had sought the Centre’s response after hearing a borrower’s counsel, senior advocate Rajiv Datta. The counsel had questioned charging of interest on loans during the moratorium on payment of EMIs. On Wednesday, Datta said, “The Centre has sought numerous adjournments on the ground that it will consult the finance ministry on this issue. We do not know till date how many have opted for moratorium and what is the stand of the Union government on this issue.”
Senior advocate Kapil Sibal said the moratorium period would end on August 31 and the RBI has predicted that the next quarter was not going to be any better than the previous one in terms of improvement in the economy. If interest waiver is not given, most borrowers would be declared defaulters after August 31, he said.
Opposing the waiver of interest, the RBI had said, “As far as regulation of banks is concerned, the RBI draws upon the considerations of protection of depositors’ interest and maintenance of financial stability, which also require that the banks remain financially sound and profitable.”
It said the freeze on repayment of loans through EMIs, extended till August 31, was done with “the objective 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”.