SC hits out at Centre in interest waiver case, says can't hide behind RBI, must clarify its position

The Supreme Court on Wednesday asked the Centre to clarify its position on the waiver of interest, waiver of interest on the interest. Hitting out at the government during the hearing on the plea seeking interest waiver for a six-month moratorium on loans announced by the Reserve Bank of India (RBI), the apex court observed that the banking regulator's position will add to the confusion. It said the Centre must clarify its position under the Disaster Management Act as it has got ample powers under it.

It said the government should not think about only business, it should also think about the plight of the people. The stand of the RBI so far is aligned with concerns of the industry and the government seems to be hiding behind the RBI, the apex court said.

Presenting the Centre's stand, Solicitor General Tushar Mehta said that the RBI as a regulator is the one that will take a position. The RBI is now saying that there cannot be a one size fits all solution, he added. The RBI is looking to identify the stressed accounts and then provide relief in terms of lower interest rates. Mehta further said that the Supreme Court should not make such observations, it will be distorted and reported.

In response, the Supreme Court observed that the problem arose on account of the lockdown and the government must clarify its position and it has still not filed its response on the issue.

The apex court will now hear the matter on Spetember 1.

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Supreme Court was hearing a plea seeking interest waiver on outstanding loan payments for the period of the nationwide lockdown and to widen the RBI's March 27 circular.

Consequently, the apex court has issued a notice to the central government and to RBI seeking a reply within two weeks.

According to the circular, RBI is allowing financial institutions to allow customers a moratorium on loan installments that fall between March 1 and May 31.

However, under the RBI circular, the interest chargeable during the moratorium period of three months would be added to the loan installments that fall after the prescribed period. It is this interest burden that is being contested in the plea.

The plea argued that the aim of the moratorium circular was to provide relief on account of a loss of livelihood and income during the nationwide lockdown. The petition said if those suffering from the loss of income are unable to pay the monthly equated monthly installments (EMIs), they surely can’t be expected to be able to pay the interest dues.

The petitioner argued that the imposition of interest burden would have a devastating effect. Such an interest burden, as per the plea, defeats the very purpose of allowing the relief to customers.

It also argued that the interest burden is violative of the right to life and the right to livelihood. Petitioner argued that RBI imposing the interest burden is both arbitrary and capricious.