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Waiver of interest on EMIs during moratorium against basic canon of finance: Centre to SC

New Delhi: Waiver of interest on deferred EMIs during the moratorium period would be against the basic canons of finance and unfair to those who repaid loans as per schedule, the Centre told the Supreme Court on Tuesday.

The Reserve Bank of India has, however, come out with a scheme which provides for an extension of the moratorium for two years to certain stressed borrowers, the Central government informed the Apex Court.

The Ministry of Finance has filed an affidavit before the Apex Court which had asked the Centre and the RBI to review the move to charge interest on EMIs and interest on the interest during the moratorium period introduced under the scheme due to the COVID-19 pandemic.

During the hearing of a PIL on the issue, Solicitor General Tushar Mehta, appearing for the Centre and RBI, told a bench headed by Justice Ashok Bhushan that the moratorium period on repayment of loans amid the COVID-19 pandemic is extendable by two years. The bench would hear the case on Wednesday.

There cannot be a one-size fit all solution to all the problems faced by the banking sectors, Aditya Kumar Ghosh, Under Secretary with the Ministry of Finance, said in the affidavit.

The government said any post facto change in the terms of the RBI circulars with regard to non-charging of interest during the moratorium period would be unfair to those who kept paying their EMIs.

"I respectfully state and submit that ex post facto change in the terms and conditions of the offer of moratorium favouring those who availed of it over those who made the extra effort of repaying as per schedule would be grossly inequitable and patently unfair for those who did not avail of the benefits of moratorium initially or gave it up subsequently. "A waiver of the interest on interest during moratorium would also be against the basic canons of finance," the affidavit said.

The RBI, through its circulars of August 6, has empowered the banks to resolve Covid-related stress and customise relief to individual borrowers through grant of various concessions in terms of alteration in the rate of interest and haircut on the amount payable as interest, it said.

The RBI circular also provides for extension of the residual tenor of the loan, with or without a moratorium, by up to two years, waiving penal interest and charges, rescheduling repayment, converting accumulated interest into a fresh loan with a deferred payment schedule and sanction of additional loan, the affidavit said.

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