Levying of interest on loan amount during RBI moratorium
The Supreme Court of India issued a notice on a plea concerning the levying of interest on the loan amount despite the RBI-ordering a three-month moratorium on the payment of EMIs till May 31st, which has now been extended till August 31, 2020.
The Centre has been asked to respond to the plea in a week’s time. Earlier, when the Court took the matter up for hearing through video conference on May 8, Solicitor General Tushar Mehta had told the Court that he would take instructions on this issue from the RBI and the Centre.
On March 27, the RBI had permitted all lending institutions to allow a three-month moratorium on payment of all kinds of installments, including those for credit cards and for all term loans outstanding between the period of March 1st, 2020 and May 31st, 2020.
A similar three-month deferment for all working capital loans to help borrowers face Corona virus-related economic hardships was also permitted.
Senior Advocate Rajiv Dutta appeared for the petitioner and has moved the Supreme Court in the capacity of a borrower aggrieved by the March 27 notification, in so far as it allows for charging of interest on the loan amount during the moratorium period.
The petitioner has submitted that at a time when the lockdown is in effect, the charging of interest on the loan despite the moratorium period is causing people “hindrance” and that it obstructs in the “right to life” guaranteed to the people under Article 21 of the Constitution of India.
Earlier, on April 30th, the Supreme Court had asked the RBI to ensure that its loan moratorium policy permitting exemption from paying EMIs and other loans during the COVID-19 lockdown period is implemented by the banks.
However, the Court had left the question of law open and had noted that the parties before the Court in that instant batch of petitions were not aggrieved parties.
Highlighting that he is an aggrieved party, the petitioner in the instant case submits that the notification is against the principles of natural justice. In this regard, he highlights that on the one hand all the means of livelihood stand suspended for the time being, and on the other, interests are being charged for the moratorium period which would lead to an increased bill for a monthly payment of EMIs.