Loan moratorium: Expert panel to assist govt for assessment of relief to bank borrowers

The committee comprising former Comptroller Auditor General (CAG) chairperson Rajiv Mehrishi, former monetary policy committee (MPC) member Ravindra H. Dholakia, and former Managing Director of State Bank of India (SBI) and IDBI Bank B. Sriram will submit its report within a week’s time.

“The terms of reference includes measuring the impact on the national economy and financial stability of waiving of interest and waiving of interest on interest on the covid-19 related moratorium. Suggestions to mitigate financial constraints of various sections of society in this respect and measures to be adopted in this regard," an official statement said. SBI will provide secretarial support to the panel. The panel can also consult banks, stakeholders for this purpose.

“Various concerns have been raised during the proceedings of the ongoing hearing in Hon’ble Supreme Court of India, in the matter of Gajendra Sharma Vs. UoI and Others, of the matter regarding the relief sought in terms of waiver of interest and waiver of interest on interest and other related issues," the finance ministry said.

The development comes in the backdrop of the Supreme Court adjourning the ongoing case on moratorium for one last time. It granted the Centre, Reserve Bank of India (RBI) and banks two weeks’ time to work together and file a concrete reply on their stand on waiving of interest charged during loan moratorium and related issues. The court also ordered the interim extension of the loan moratorium till 28 September directing banks not to tag any loans as non-performing, till further orders.

The three-judge bench on took on record the submissions made by the Solicitor General Tushar Mehta, representing the Centre. It observed that government at the highest level is considering all the issues in this batch of plea related to loan moratorium. The government shall within a period of two weeks will filed a concrete response holistically considering all the sectors.

The central bank had on 22 May extended moratorium on term loans till 31 August to mitigate the financial hardships of citizens, amid a nationwide lockdown due to covid-19. In March, the central bank had allowed a three-month moratorium from paying EMIs and other loans on payment of all term loans due between 1 March and 31 May, which was extended to another three months.

Petitioner Gajendra Sharma submitted in his petition that the interest would continue to accrue during the moratorium, which ultimately the borrower would have to pay. The petitioner argued that no interest should be charged during the moratorium because people are facing “extreme hardship’. The petition also stated that paying additional interest on top of regular EMIs would be difficult.

As per the 27 March RBI circular, banks and other financial institutions are permitted to provide a moratorium of three months for all term loan installments which are due for payment between 1 March and 31 May. Term loans will include all kinds of retail loans such as vehicle loan, home loan, and personal loan, agricultural term loans as well as crop loans. The central bank has clarified that credit card dues will also be eligible for the moratorium. The moratorium will be provided for both interest as well as principal repayment, which means the moratorium is on your entire EMI.