Loan moratorium extendable for 2 years as per Covid impact, Centre tells Supreme Court

The Centre and Reserve Bank of India have told the Supreme Court that the moratorium period on repayment of loans amid the Covid-19 pandemic is “extendable” by two years.

Solicitor General Tushar Mehta, appearing for the Centre and the RBI, told the Supreme Court bench headed by Justice Ashok Bhushan that several steps have been taken for stressed sectors and the economy has shrunk due to the pandemic. The Solicitor General said, “We are in the process of identifying the distressed sectors to vary benefits as per the Covid-19 impact of hit they have taken”.

The Court said that it will hear and decide on 2 September about the bunch of petitions demanding waiver of interest, or waiver of interest on interest on the suspended EMIs (equated monthly instalments) during moratorium period.

The moratorium scheme which was implemented to provide relief to borrowers during the Covid-19 crisis, ended on August 31. Borrowers had been permitted to defer loan repayments for a period of six months.

The Supreme Court had earlier asked the Centre and the Reserve Bank of India (RBI) to review the move to charge interest on EMIs during the moratorium period introduced under the scheme. According to the Court, there was “no merit in charging interest on interest” for deferred loan payment instalments during the moratorium period announced in wake of the Covid pandemic.

On August 26, the Supreme Court had observed that the Centre was “hiding behind the RBI” and had asked it to reply within a week on the issue of interest being charged on instalments which have been deferred under the central bank's scheme during the moratorium period amid COVID-19 lockdown.

One Agra resident Gajendra Sharma, in his plea before the Supreme Court had sought a direction to declare the portion of the RBI's March 27 notification ‘as ultra vires to the extent it charges interest on the loan amount during the moratorium period and said that it created hardship to the petitioner being borrower and creates hindrance and obstruction in “right to life” guaranteed by Article 21 of the Constitution of India’.

He had also sought a direction to the government and the RBI to provide relief in repayment of loan by not charging interest during the moratorium period.