SC orders Center, RBI to review loan moratorium program

NEW DELHI: The Supreme Court on Wednesday ordered the Center and the Reserve Bank of India (RBI) to review the moratorium regime on term loans and create tailor-made schemes for various sectors, including agriculture .

“The central government cannot raise its hand in a sign of helplessness. He cannot now say that it is between the banks and the customer, ”said the supreme office, headed by Ashok Bhushan. It was the Centre’s duty to ensure that “the benefits are given to the client on purpose,” added the judiciary.

The three-judge bench, also comprising Justices Sanjay Kishan Kaul and MR Shah, postponed the hearing of the case to the first week of August.

On May 22, the central bank extended the moratorium on term loans until August 31 as part of the nationwide lockdown due to covid-19. In March, the central bank authorized a three-month moratorium on payment of IMEs and other loans on the payment of all term loans due between March 1 and May 31.

The court also asked for clarification on whether the Association of Indian Banks can come up with new guidelines.

The court observed that customers were not taking advantage of the moratorium because they know there is no benefit to them. He also observed that despite the fact that the Center took a long time to react and find a way out, nothing happened.

The Association of Indian Banks and the State Bank of India asked to postpone the hearing in the case for three months. The banks have argued that at that point they will then experience the burden of the moratorium.

Petitioner Gajendra Sharma said that during the three month period interest would continue to accumulate during the moratorium, which the borrower would eventually have to pay. The petitioner argued that no interest should be charged during the moratorium, as people face “extreme hardship”.

The petition also stated that it would be difficult to pay additional interest on top of regular IMEs.

In accordance with the RBI Circular of March 27, banks and other financial institutions are allowed to grant a three-month moratorium on all term loan installments that are due between March 1 and May 31. Term loans will include all kinds of retail loans such as auto loans, home and personal loans, agricultural term loans as well as crop loans. The central bank has clarified that credit card contributions will also be eligible for the moratorium. The moratorium will apply to both interest and principal repayment, which means that the moratorium will apply to your entire IME.

The moratorium basically means that you don’t have to pay your IMEs for this period and that no criminal interest will be charged. It is not a concession of any kind and it is simply a deferral of payment to relieve borrowers facing liquidity issues.

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