Solicitor General Tushar Mehta, appearing for the Centre and the Reserve Bank of India, on Tuesday informed the Supreme Court that the loan moratorium introduced during the COVID-19 lockdown could be “extendable to two years”.

Appearing before a Bench led by Justice Ashok Bhushan, Mr. Mehta was asked whether the moratorium, which was to expire on August 31, had been extended.

“It is extended... It is extendable to two years,” Mr. Mehta submitted. He later clarified that his submission meant the moratorium is “capable of being extended” as per an RBI circular.

During the hearing, Mr. Mehta said several sectors were under stress.

“We are in the process of identifying the distressed sectors to vary benefits as per the impact of hit they have taken. We are trying our best to solve the problem,” Mr. Mehta submitted.

He urged the Supreme Court not to take an adversarial view of the issue.

“The national economy is stressed,” Mr. Mehta. He referred to the shrinking of the economy in the last quarter by 23%.

“There are more issues involved, the economy is also stressed. This requires some extent of discussion,” Mr. Mehta said.

The law officer said he had already held preliminary talks with the RBI officers. “Let the Central government, RBI and the bankers’ association put their heads together,” he suggested.

“You had made a statement like this at the very beginning...” the Bench responded.

It has scheduled a hearing on September 2 to discuss an affidavit filed by the government in the case.

In the last hearing on August 28, the Supreme Court had criticised the Centre for “hiding behind the Reserve Bank of India” without making its stand clear on the loan moratorium scheme introduced during the pandemic.

The court had wanted to know whether the deferment of loan interest to prop up borrowers through their financial crisis during the national lockdown would lead to accrual of further interest once the freeze is lifted on August 31.

Noting that the issue had been pending indecisively for some months now, the court had advised the government against adopting a blinkered vision, focussing only on matters of business of banks and not considering the plight of people financially dented by the “problems created by your lockdown”.

The court had said the government was empowered to take an independent stand under the Disaster Management Act.

“The problem was created by your lockdown... It appears Union of India is not taking an independent stance and is relying on the Reserve Bank of India (RBI)... This is not the time to look after business only, consider providing relief,” a Bench led by Justice Ashok Bhushan had addressed Mr. Mehta.

Mr. Mehta had said the government was working in tandem with the central banker and it was unfair to say it did not have an independent view.