New Delhi: The Supreme court on September 2 gives the verdict that Banks are free to restructure loans. However, they cannot penalize honest borrowers by charging interest on deferring EMI payments.
The final hearing was commenced by a bench headed by Justice Ashok Bhushan. A batch of pleas raising the issue of interest on instalments under the scheme during the moratorium period. The paying of interest on interest is a double whammy for borrowers.
Senior counsel Rajiv Dutta appeared for petitioner Gajendra Sharma. Gajendra Sharma has taken a home loan from a bank. He filed a petition against the accumulation of interests on EMIs even during the moratorium period.
Dutta claims that the Reserve Bank of India (RBI) is a regulator and not an agent of banks. RBI has given many reliefs to banks. However, the borrowers are not given any relief. The banks are penalizing borrowers even during the pandemic.
On March 27, RBI gave permission to all commercial banks, co-operative banks, Financial Institutions and NBFCs to allow moratorium of three months on payment of instalments. However, in May, RBI announced the extension of loan moratorium by 3 more months to August 31.
On September 1, the Centre and RBI told the Supreme court that the moratorium period on repayment of loans during the COVID-19 pandemic is extendable by two years. Also, several steps have been taken to help various sectors. Solicitor General Tushar Mehta was representing the Centre and RBI. He stated that the economy has contracted by about 23% in the April-June quarter. This was due to the COVID-19 lockdowns and its restrictions.