‘Economy is stressed’: Centre to SC on interest on loans during moratorium

The court was hearing a plea for waiver on interest charged by banks, citing the relief earlier announced by the RBI on the payment of equated monthly instalments (EMIs) between March and August 31 due to the pandemic.

Indian economy is “stressed”, the Central government told the Supreme Court on Tuesday, stating that issues relating to levy of interest on loans in moratorium and interest on such interest requires detailed consideration by the Centre, Reserve Bank of India (RBI) and Bankers Association.

Mehta told the court on Monday that the moratorium period is extendable by two years as per the RBI circular. The moratorium announced by the RBI had expired on August 31. (AFP)

Solicitor general Tushar Mehta told the court that the Centre, the RBI and the Bankers Association should be allowed to “put their heads together” and come up with a solution.

“There are issues. The economy is stressed. This requires some discussion. What I am suggesting is to allow the Centre, RBI and Bankers Association to put our heads together. We will have to identify the class of borrowers, sectors, etc which will take a hit,” Mehta said.

The court was hearing a plea for waiver on interest charged by banks, citing the relief earlier announced by the RBI on the payment of equated monthly instalments (EMIs) between March and August 31 due to the pandemic.

The plea by Agra resident Gajendra Sharma specifically cited the RBI’s March 27 notification announcing a moratorium on loan repayments while permitting banks to levy interest. The notification to the extent of allowing levy of interest was challenged by Sharma.

During the last hearing, the Court had asked the Centre to file an affidavit in the matter instead of relying on the RBI’s affidavit and “hiding behind RBI”.

The court was informed by Mehta that the Union government filed its affidavit on Monday.

The matter was adjourned for detailed hearing tomorrow.