The Centre and the Reserve Bank of India informed the Supreme Court on Tuesday that the moratorium on repayment of loans is extendable to two years in certain conditions, and that the sectors most distressed by the economic slowdown are being identified.
"We are in the process of identifying the distressed sectors to vary benefits as per the impact of the hit they have taken,” the Solicitor General Tushar Mehta told the three-judge bench, headed by Justice Ashok Bhushan.
The apex court said it will hear the matter again and decide on Wednesday, on a bunch of petitions demanding waiver of interest, or waiver of interest on interest on the suspended monthly instalments during the moratorium period.
The bench was hearing a plea challenging levy of interest on loans during the moratorium period. The plea, filed by Agra resident Gajendra Sharma, has sought a direction to declare the portion of RBI's March 27 notification as something beyond the RBI’s legal power or authority, to the extent that it charges interest on the loan amount during the moratorium period, which creates hardship for the petitioner being borrower and creates hindrance and obstruction in 'right to life' guaranteed by Article 21 of the Constitution of India".
The top court had observed in June that the question is not of waiver of complete interest for the entire moratorium period but it is limited only to interest charged on interest by banks. It had also observed that the charging of interests by banks during the six-month moratorium period on term loans was ‘detrimental’.
The RBI, on its part, had submitted that a waiver of interest on loans will impact the financial viability of the country’s financial sector and that the banks could forego about Rs 2 trillion in interest income if interests are waived off for the six months duration of the moratorium.
On Tuesday, Solicitor General Mehta suggested a meeting of representatives of the Finance Ministry with RBI and banks to find a proper solution. He also sought some more time on behalf of the Centre and requested the bench to examine the affidavit submitted by the government. The bench, however, said that the final hearing will be on Wednesday.
The RBI’s circular on personal loan restructuring does say that the resolution plans may include rescheduling of payments or granting of moratorium, based on an assessment of income streams of the borrower, subject to a maximum of two years. “Correspondingly, the overall tenor of the loan may also get modified commensurately. The moratorium period, if granted, shall come into force immediately upon implementation of the resolution plan,” it says.