Loan moratorium extendable up to two years, Centre, RBI tell Supreme Court

Solicitor General Tushar Mehta on Tuesday informed the Supreme Court that the six-month loan moratorium period, announced in the wake of Covid-19 pandemic, was extendable upto two years.

Appearing for the Centre and RBI, the law officers sought time to decide upon the issue of interest on accrued interest being charged by the banks during the moratorium.

A bench of Justices Ashok Bhushan, R Subhash Reddy and M R Shah allowed his plea and put the matter for consideration on Wednesday.

In his submission, he said we are in the process of identifying the distressed sectors to vary the benefits as per the effect of the since the GDP was also down by 23%. He also said an affidavit has been filed on issue of charging interest which may be considered by the court.

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In an affidavit, the Finance Ministry said besides concessions in the rate of interest, the framework under RBI’s circulars issued on August 6, 2020 also permits lenders to allow moratorium of up to two years, the irrespective of current six month period ending on August 31.

"This extended moratorium becomes part of an individualised solution for a borrower and is made available along with other interventions. The RBI framework is specific to the situation arising out of the pandemic. Thus, a borrower, who is fearful of being in default as on September one and becoming an NPA soon thereafter, could continue to avail moratorium as a part of the resolution plan implemented in terms of the above circular," it said.

Hearing a PIL by Gajendra Sharma, the court had on August 26 pulled up the Union government for "hiding behind the RBI" and asked it to take decisions, independent of RBI, on charging interest on loans and interest on interest on six-month loan moratorium, ending on August 31.

The RBI issued circulars on March 27, April 17 and May 23 for an initial three-month moratorium period on loan repayment which was subsequently stood extended till August 31. The measure was announced as a relief to the people after the nationwide lockdown was imposed since March 25 to contain Covid-19 pandemic.