The Supreme Court (SC) on Wednesday said there is no merit in burdening customers, who have opted for the RBI-approved loan moratorium, with additional interest.
“The central government can’t raise its hands in helplessness. It can’t say now that it is between banks and customers,” the apex court bench, headed by Ashok Bhushan, said. It was the Centre’s duty to ensure that “benefits are given to customers purposefully”, the bench added.
“Govt should consider interfering,” the bench comprising Justices Ashok Bhushan, MR Shah, and SK Kaul said. “Once you fix a moratorium it should serve the purpose desired..we see no merit in charging interest on interest,” the bench added.
During today’s hearing in the matter, Solicitor General Tushar Mehta explained that moratorium means deferment and that waving interest is a difficult task for banks as they also have to pay interest to depositors.
“Problem is that even banks have to pay interest to depositors. Therefore waiving interest not easy,” Mehta said.
The central bank had on 22 May extended the moratorium on term loans till 31 August amid the nationwide lockdown due to COVID-19. In March, the central bank had allowed a three-month moratorium from paying EMIs and other loans on payment of all term loans due between 1 March and 31 May.
The court also sought clarity on the question on whether the Indian Banks’ Association can come up with new guidelines.
The court observed that customers were not availing the loan moratorium as they are aware that there are no benefits for them. It also observed that despite the fact that the Centre took time to respond and to find a way out, nothing has happened.
But Justice Bhushan said that the “deferred” amount should stay as it is while it is under moratorium. He meant to say that additional interest should not be charged during the moratorium months.
Senior Advocate Harish Salve, representing banks, told SC that the issues will have to be tackled on a sector-to-sector basis and that the interest waiver petition is “premature”.
“We are still in a tunnel. Let’s wait till we come out of this tunnel.” Salve said on behalf of banks.
While Justices Kaul and Bhushan heard all the concerns, they again reiterated that their concern is related to charging of “interest on interest” for those who have opted for the moratorium.
“We are only saying provide the waiver on interest on interest,” said the bench.
In conclusion, the bench asked the government to interfere in the matter soon and find a way to waive off additional interest during the moratorium.
The matter will be heard next in the first week of August.