Interest On Loans During Moratorium: Supreme Court Pulls Up RBI

New Delhi: The Supreme Court (SC) on Thursday took exception to banks levying interest on loans after the Reserve Bank of India (RBI) announced a moratorium on loan repayments between March and August 31 to ease people’s hardships caused by the coronavirus-induced nationwide in India.

A three-member Supreme Court (SC) bench made the observation while hearing a PIL. Agra resident Gajendra Sharma, who filed the PIL, sought a waiver on interest charged by a private bank as the RBI had earlier announced relief on payment of EMIs between March and August 31.

The petitioner cited RBI’s March 27 and May 22 notifications announcing a moratorium on loan repayments while permitting banks to levy interest.

“On one hand you are granting moratorium (on loans) but continuing with interest. It is more detrimental,” felt the three-member bench, comprising Justices Ashok Bhushan, SK Kaul, and MR Shah.

A day earlier, the RBI had responded to Sharma’s plea.

“RBI does not consider it prudent or appropriate to go for a forced waiver of interest, risking the financial viability of the banks it is mandated to regulate, and putting the interests of the depositors in jeopardy,” the central bank told the apex court.

But the Supreme Court countered by saying, “You have to deal with two aspects — interest accruing during the period of moratorium and interest upon the interest that accumulates.”

The apex court directed the Union government and RBI to work out a response by June 12, which was set as the next date of hearing of the case.