'Don't hide behind RBI': SC raps Centre over inaction on loan moratorium interest waivers

In order to allay the hardships induced by the Covid-19 lockdown since late March, the Reserve Bank of India (RBI) initially allowed a three-month moratorium on loan repayments, which was later extended to August 31.

The rationale behind the moratorium was to ease the burden on borrowers who have been under financial distress owing to the lockdown measures and its devastating economic consequences.

At the beginning of June, RBI, responding to a notice on a petition seeking a complete waiver of interest accrued on loan installments during the moratorium period, in an affidavit said “the moratorium was only a deferral on loans and interest till a point in time no further than March 31, 2021”, reported Times Now.

RBI told the court the banks have been given a freehand on the way they would collect the interest while warning that waiving the interest on suspended loan EMIs will severely endanger the health of India’s commercial banks, added the report.

With the moratorium period set to end on August 31, the Finance Ministry is yet to file its response on the waiver of interest. The three-judge bench of SC pulled up the government for the long delay in filing an affidavit explaining its stance over the matter, accusing it of 'hiding behind the RBI', said the report.

The SC directed the Centre to file the affidavit within three days. 

“This is not the time to think about the business of banks only. The government must consider the sufferings of borrowers also,” the SC bench was quoted as saying by Times Now.