The RBI had on March 27, 2020 announced a moratorium on loan instalments due between March 1 and May 31. The moratorium period was later extended by three months till August 31, 2020.
On February 8, 2021, the division bench of the Delhi High Court stayed the operation, implementation and execution of the “status quo order” passed earlier by the single judge of the Delhi High Court in the dispute. (Image: Pixabay)
The Supreme Court (SC) on March 22 said a complete waiver of interest during the six-month loan moratorium period is not possible, and that it cannot allow extension of the moratorium.
A bench comprising of three judges pronounced its judgment on a batch of petitions seeking the complete waiver of interest and extension of the loan moratorium period in view of financial pain due to COVID-19.
The court said granting such relief can have consequences for the economy.
“From various steps taken by Centre and RBI, it cannot be said that the Centre has not taken steps in the backdrop of COVID-19. Therefore, petitioners will not be eligible for a waiver of interest on interest, extended moratorium period or sector-specific reliefs,” Justice MR Shah said, as quoted by legal news website Bar & Bench.
Justice MR Shah also said there is no justification for waiving compound interest only on loans of up to Rs 2 crore.
The SC said any interest on interest (compound interest) that has been collected shall be adjusted in the next instalment payable.
The top court said a judicial review is not possible on economic policy matters.
“What is an economic policy or what will be financial package be will be decided by the Centre and RBI after detailed consultations. Only if some sectors are not satisfied Court cannot intervene in such matters of policy,” Justice MR Shah said.
The Reserve Bank of India (RBI) had on March 27, 2020, announced a moratorium on loan instalments due between March 1 and May 31. The moratorium period was later extended by three months till August 31, 2020.
The moratorium was intended to provide borrowers relief during the COVID-19 pandemic, enabling them to defer payments on EMIs.
In October 2020, the central government announced a waiver of compound interest charged during the moratorium period on certain categories of loans of up to Rs 2 crore.
