In a move to offer relief to borrowers during the coronavirus outbreak, the central bank in March announced a moratorium on repayment of term deposits for three months and the same was extended until August 31.
What is the plea?
The apex court is hearing petitions demanding waiver of interest, or waiver of interest on interest on the suspended monthly instalments during the moratorium period.
The plea is challenging the levy of interest on loans during the moratorium period. According to business daily Business Standard, the plea filed by Agra resident Gajendra Sharma has asked to declare the portion of the RBI’s March 27 notification as something beyond the bank’s legal power or authority.
Earlier, the apex court has said that the question is not of waiver of complete interest for the entire moratorium period but it is limited only to interest charged on interest by banks.
As per the legal news website LiveLaw, Senior Advocate Rajiv Dutta for a petitioner to SC said, RBI is only a regulator and are not agents of the banks as they are treating themselves and it seems that the banks are hiding behind the RBI. He alleged that they want banks to make profits during COVID-19.
What did the RBI say earlier?
In response, the RBI had submitted that a waiver of interest on loans will impact the financial viability of the country’s financial sector. It highlighted that the banks could forgo about Rs 2 trillion in interest income if the interests are waived for the six months duration of the moratorium.
RBI has also noted that charging of interests by banks during the six-month moratorium period on term loans was ‘detrimental’.
On Tuesday, the Solicitor General has asked the representatives of the finance ministry to hold a meeting with the RBI and banks to find a solution.