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Order on Loan Moratorium: Supreme Court asked the government – Those accounts which are not NPA till August 31, should be given protection till the next order; Next hearing on 10 September

  • The RBI had allowed the loan instalments to be deferred for 6 months due to the lockdown.
  • This exemption expired in August, now customers are appealing to increase it and waive interest

The applications for taking forward the loan moratorium granted by the RBI in the lockdown and waiver of interest were heard in the Supreme Court. The court has asked the government to provide protection to the customers whose accounts were not declared NPA till August 31, till the case is settled. The next hearing will be on September 10. Earlier, Solicitor General Tushar Mehta argued on behalf of the government. He said, “Can not discount interest but will reduce the pressure of payment. The banking sector is the backbone of the economy. We cannot take any decision weakening the economy.”

Loan moratorium means to waive the instalment of the loan for a few months… RBI had given this facility for 3 months in March, given the Corona situation and lockdown, then increased to 3 more months till August.

Now that the moratorium has completed 6 months, customers are saying that it should be increased further. Even more important is that the interest of moratorium period should also be waived. Because charging interest on interest would be a double whammy. The reason for this is that RBI had only allowed postponing EMI, but the interest on the outstanding instalments will have to be repaid.

Argument by customers taking a loan
1. Senior Counsel Kapil Sibal, on behalf of a group of clients and the Maharashtra Chapter of the construction industry, said in Tuesday’s hearing, “If the moratorium does not increase, many people will default in the loan payment. In this case, the expert committee has to prepare the sector-wise plan should do.”

2. Advocate A Sundaram, on behalf of the real estate developers’ organization CREDAI, argued, “It is wrong to charge interest from customers in the Moratorium. This could lead to non-performing assets (NPAs) going forward.”

3. Advocate Ranjit Kumar, on behalf of the Shopping Centers Association of India, said, “People are facing problems because of Corona. Measures should be taken to give relief to them. RBI cannot just speak like a spokesperson for banks. The situation is really bad. Theatres, bars and food courts are closed. How will we earn and give salary to the employees? Appeals to the court that the sector-wise relief should be considered. “

Earlier on Tuesday, the government said that the moratorium period could be extended for up to 2 years, given the situation in Corona. The government’s reply came because, on August 26, the Supreme Court had reprimanded the government and said that the situation should be cleared in this matter in 7 days. The court had commented that the government is taking cover of the RBI decision, while it has the authority to make decisions on its own.

What is a moratorium?
Due to the corona and lockdown, the RBI in March allowed people to postpone the moratorium or loan EMI for 3 months. Later it was extended for 3 months till 31 August. RBI had said that if the loan instalment is not repaid for 6 months, then it will not be considered a default. However, after the moratorium, full interest will have to be paid on the outstanding payment.

 

 

 

 

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