A three-member Supreme Court (SC) bench on Thursday took exception about banks levying interests on loans when the Reserve Bank of India (RBI) had announced a moratorium on loan repayments between March and August 31 because of the lockdown restrictions following the raging coronavirus disease (Covid-19) outbreak.
The apex court made the observation while hearing a public interest litigation (PIL) by an Agra resident, Gajendra Sharma, who demanded a waiver on interest charged by a private bank citing the relief earlier announced by RBI on the payment of equated monthly instalments (EMIs) between March and August 31 due to the pandemic.
Petitioner Sharma specifically cited RBI’s March 27 and May 22 notifications announcing a moratorium on loan repayments while permitting banks to levy interest.
The three-member bench, comprising Justices Ashok Bhushan, SK Kaul, and MR Shah, said, “On one hand you are granting moratorium (on loans) but continuing with interest. It is more detrimental.”
The court’s observation came a day after RBI submitted its response while opposing Sharma’s plea.
The central bank told the apex court: “RBI does not consider it prudent or appropriate to go for a forced waiver of interest, risking the financial viability of the banks it is mandated to regulate, and putting the interests of the depositors in jeopardy.”
But the court told Solicitor-General Tushar Mehta, who appeared for the Union Ministry of Finance, that: “You have to deal with two aspects –interest accruing during the period of moratorium and interest upon the interest that accumulates.”
The court asked the Centre and RBI to jointly work out a response by June 12, the next date of the hearing of the case.
Earlier, the court frowned upon RBI for leaking its affidavit in the media a day before the hearing.
Senior advocate Rajiv Dutta, who appeared on behalf of petitioner Sharma, drew the court’s attention and alleged that RBI leaked the affidavit to the media as it had sought to sensationalise the case and also took a dig at the central bank for backing private banks over the citizens’ financial woes triggered by the pandemic.
RBI stated in its affidavit that it shares the twin mandate to secure the interest of depositors and maintain financial stability as well. “Interest on advances (loans) forms an important and vital source of income for banks, which allows the banks to sustain and remain financially sound and profitable,” it added.
Petitioner Sharma, who runs an optical shop in Agra and had taken a home loan of Rs 37 lakh from a private bank, has stated in his plea that as a borrower he is not in a position to pay his EMIs because his earnings have become nil due to the lockdown restrictions.
“The imposition of interest (by banks) during the moratorium period is devastating and wrong,” he argued in his plea.
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