Moratorium on ‘extendable’ loans under RBI circular for two years, center says at Supreme Court

The government told the Supreme Court on Tuesday that the moratorium on loan repayment allowed during the coronavirus crisis can be extended for two years. This came a day after the end of the deadline set by the government for temporary loan repayment relief. The Reserve Bank of India had allowed banks and other financial institutions to offer a six-month moratorium to all existing term borrowers, individuals and businesses, until August 31.

Solicitor General Tushar Mehta, representing the government, told the Supreme Court that discussions were underway with the central bank and the bankers association to reach a solution on the issue of waiving interest on loans during the moratorium period. “There are more issues at stake, GDP is down 23% and the economy is stressed,” the government lawyer said.

“The lordship can go through it, the case can be taken up tomorrow or the day after tomorrow. The interest on interest part, we have discussed that with the RBI officers,” Mr Mehta said.

“I say with a great sense of responsibility. Harish Salve has also spoken with the Bankers Association. Most issues are resolved,” the Solicitor General said.

“We also have to hear the interest in interest part as well,” said Judge MR Shah, one of the judges. The High Court will resume the case on Wednesday.

The Supreme Court had last week asked the government’s position on waiving interest on loan repayments during the moratorium, saying it “cannot hide” behind the RBI.

The RBI had informed the court earlier that there could be no interest relief on term loans as the financial health and stability of banks would be at risk.

A bench headed by Judge Ashok Bhushan was hearing motions filed by Gajender Sharma and lawyer Vishal Tiwari to extend the standstill period to help borrowers defer their EMI payment on term loans amid the pandemic.

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