Supreme Court condemns RBI on interest on moratorium loans | Latest India News

On Thursday, a bench of three members of the Supreme Court (SC) objected to banks charging interest on loans when the Reserve Bank of India (RBI) announced a moratorium on loan repayments between March and on August 31 due to lockdown restrictions following the raging coronavirus disease outbreak (Covid-19).

The Supreme Court made the observation during a Public Interest Litigation (PIL) hearing from Agra resident Gajendra Sharma, who requested a waiver of interest charged by a private bank citing the relief previously announced by RBI on the payment of equivalent monthly installments (IME) between March and August 31 due to the pandemic.

Petitioner Sharma specifically cited RBI notifications of March 27 and May 22 announcing a moratorium on loan repayments while allowing banks to charge interest.

The three-member bench, including Judges Ashok Bhushan, SK Kaul and MR Shah, said: “On the one hand, you grant a moratorium (on loans) but you continue with interest. It’s more damaging. “

The court observation came a day after RBI submitted its response while opposing Sharma’s plea.

The central bank told the Supreme Court: “RBI does not consider it prudent or appropriate to opt for a forced waiver of interest, risking the financial viability of the banks it is responsible for regulating and putting the interests of depositors in danger.”

But the court told Solicitor General Tushar Mehta, who appeared for the Union Finance Ministry, that: “You have to deal with two aspects: the interest accrued during the moratorium period and the interest on interest that s ‘accumulate. “

The court asked the Center and RBI to jointly develop a response by June 12, the next hearing date for the case.

Previously, the court disapproved of RBI for leaking its affidavit to the media a day before the hearing.

Lead attorney Rajiv Dutta, who appeared on behalf of petitioner Sharma, drew the court’s attention and alleged that the RBI leaked the affidavit to the media as it sought to sensationalize the case and also made a search at the central bank for supporting private banks during the financial hardship of citizens triggered by the pandemic.

RBI said in its affidavit that it shares the dual mandate of securing the interests of depositors and also maintaining financial stability. “Interest on advances (loans) is an important and vital source of income for banks, which allows banks to maintain themselves and remain financially sound and profitable,” he added.

Petitioner Sharma, who runs an optical store in Agra and had taken out a Rs 37 lakh home loan from a private bank, said in his plea that as a borrower he was unable to pay his IME because his income had become zero. due to containment restrictions.

“The imposition of interest (by the banks) during the moratorium period is devastating and wrong,” he argued in his plea.

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