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Loan moratorium case: Hearing of petitions seeking interest waiver to resume on Dec 14

The RBI had in March announced a moratorium on repayment of term deposits for three months, which was later extended till August 31.

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Supreme Court of India, Delhi (Image Source: File Photo)
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The hearing in the Supreme Court on loan moratorium or interest waiver case will continue on December 14. A bench of Justices Ashok Bhushan, R S Reddy and M R Shah is hearing the case.

The Centre informed the bench that if it were to consider waiving interest on all the loans and advances to all categories of borrowers for the six-month moratorium period announced by RBI in view of COVID-19 pandemic, then the amount foregone would be more than Rs 6 lakh crore.

If the banks were to bear this burden, then it would necessarily wipe out a substantial and a major part of their net worth, rendering most of the lenders unviable and raising a very serious question mark over their very survival, it said.

The bench was informed by Solicitor General Tushar Mehta, appearing for the Centre, that this was one of the main reasons why waiver of interest was not even contemplated and only payment of instalments was deferred. The top court is hearing a batch of pleas of various bodies including from real estate and power seeking sector-wise relief in view of the COVID-19 pandemic.

Mehta said that though it may not be possible to give the exact percentage of the borrowers who have not availed of the moratorium and have deposited installments in time; approximately such class would be more than 50 percent.

Mehta said that granting relief to distressed small borrowers, the Centre decided that the relief on waiver of compound interest during the six-month moratorium period shall be limited to the most vulnerable category of borrowers who availed loan up to Rs 2 crore. 

The RBI had in March announced a moratorium on repayment of term deposits for three months, which was later extended till August 31. The move was expected to give borrowers more time to clear payments of EMIs amid the economic fallout of the lockdown, without being classified as NPAs.

However, under the RBI circular, the interest chargeable during the moratorium period of three months would be added to the loan installments that fall after the prescribed period. It is this interest burden that is being contested in the plea.

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