Loan moratorium scheme can be extended for two years, Centre tells Supreme Court

The Centre on Tuesday told the Supreme Court that the loan moratorium scheme, introduced during the coronavirus pandemic, can be extended by a period of two years, PTI reported. Last week, the top court had criticised the Centre for “hiding behind the Reserve Bank of India” without making its stand clear on the loan moratorium.

Solicitor General Tushar Mehta, appearing for the Centre and the Reserve Bank of India, told a bench headed by Justice Ashok Bhushan, that several steps have been taken for the stressed sectors and pointed out that the Indian economy has contracted by 23% due to the coronavirus crisis.

The court said it will hear the matter of waiving interest on installments during the moratorium period on Wednesday. Bhushan said they have not yet received any affidavit filed by the Centre.

Mehta said it was imperative that all stakeholders sit together and decide on interests payable on loans, according to Live Law.

Considering the economic impact of the lockdown imposed to fight the coronavirus crisis, the RBI had on March 27 said that banks would be allowed to grant a moratorium of three months on payment of all instalments due between March 1 and May 31. On May 23, it said that banks can extend the moratorium until August 31. However, the RBI had said it would be imprudent to go for a forced waiver of interest, risking the financial viability of the banks it was mandated to regulate and putting the interests of the depositors in jeopardy.

The top court was hearing a petition filed by Gajendra Sharma, challenging the charging of interest on loans even during the three-month moratorium period declared amid the coronavirus pandemic and the subsequent lockdown. During the last hearing, the court advised the government against adopting a blinkered vision and not looking to the plight of people financially dented by the “problems created by your lockdown”.