SC questions interest charged in loan repayment moratorium

SC questions interest charged in loan repayment moratorium

The Supreme Court on Thursday questioned the decision of banks to continue charging interest on loan amounts despite the moratorium on repayment announced by the Reserve Bank of India (RBI) in view of the national lockdown to curb the coronavirus pandemic.

“On the one hand (you are) granting moratorium and nothing (no moratorium) in interest. It is more detrimental,” Justice M R Shah, who was hearing the matter with Justices Ashok Bhushan and S K Kaul, observed.

In an affidavit filed on Wednesday, RBI had told the court that it does not consider it prudent or appropriate to go for a “forced waiver of interest” on deferred loans repayments, thereby “risking financial viability of banks it is mandated to regulate, and putting interests of depositors in jeopardy”.

The court was hearing a petition filed by Uttar Pradesh resident Gajendra Sharma, who urged the court to declare as ultra vires the part of RBI’s March 27 notification charging interest on deferred loan repayment. In his petition, Sharma said it “creates hardship in the present scenario of complete national lockdown, (which is) being extended from time to time”.

Taking up the matter on Thursday, Justice Bhushan conveyed displeasure over contents of the affidavit appearing in the media even before it had come up for hearing and cautioned that it should not happen again. Solicitor General Tushar Mehta said the Finance Ministry also wishes to file its reply in the matter.

Justice Bhushan said there are two aspects to the issue — interest during moratorium period and interest on this interest.

Justice Kaul observed that these are not normal times. “Let me respond with the Finance Ministry and the RBI together,” Mehta submitted.

Appearing for the petitioner, senior advocate Rajiv Dutta said, “The cat is out of bag…. They are saying profitability of bank (is) prime.” He referred to the top court’s earlier order allowing Air India to operate non-scheduled international flights without leaving a seat in between only up to June 6.

At this, Justice Bhushan said, “We know economic aspect (is) not higher than health of people.”

At this, Dutta said, “So only the banks should earn and rest of the country goes down under?” Dutta said he wants to file a rejoinder.

The court fixed June 12 to hear it again.

In his petition, Gajendra Sharma said he runs an optical store in Agra, UP, and had a gross annual total income of about Rs. 6.57 lakh. He had taken a home loan from ICICI Bank and has been paying EMIs without any default. But the extended lockdown, he said, created “immense burden” on his budget, as apart from paying EMI on home loan he has to pay his employees, and also manage his home and family.

While hearing some PILs on the matter, the court had on April 30 expressed doubts on whether banks were passing on reliefs announced by the RBI to borrowers and asked the apex bank to ensure compliance. However, the bench refused to interfere after noting that none of the petitioners were personally aggrieved and left the question of law open.