Moratorium on loan repayment can be extended for two years; Centre tells SC-

The Center and the Reserve Bank of India on Tuesday informed the Supreme Court that the moratorium on repayment of loans is extendable for two years in certain conditions and that the areas most troubled by the economic downturn are being identified.

Solicitor General Tushar Mehta told a three-judge bench headed by Justice Ashok Bhushan, "We are trying to identify the distressed areas, so that the benefits will vary according to the impact of the hits taken by them."

The apex court said it would hear the case again and pass a verdict on Wednesday, seeking either an amnesty of interest or amnesty of interest on monthly instalments suspended during the moratorium period.

The bench was hearing a petition challenging the interest on the loans during the postponement period. The petition filed on behalf of Agra resident Gajendra Sharma has sought a direction to declare part of the RBI notification of March 27 beyond the RBI'sRBI's legal power or authority, on the loan amount during the moratorium period. Recovers interest, which creates difficulty for the petitioner to be a debtor and creates hindrance and hindrance to the ''right to life'' guaranteed by Article 21 of the Constitution of India.

The apex court observed in June that the question is not about the waiver of full interest for the entire moratorium period. Still, it is limited only to the interest charged by banks on interest. It was also observed that the recovery of interest by banks during the six-month deferment on term loans was ''harmful''.

RBI had claimed on its part that the waiver of interest on loans would affect the financial viability of the financial sector of the country and that banks would lose around Rs 2 trillion in interest income if banks waive interest for six months. Can spend. Moratorium

On Tuesday, Solicitor General Mehta suggested a meeting of representatives of the Finance Ministry with the RBI and banks to find an appropriate solution. He also sought some more time from the Center and requested the bench to examine the affidavit submitted by the government. The bench, however, said that the final hearing would be held on Wednesday.

A bench headed by Justice Ashok Bhushan, which commenced final hearing on a batch of pleas raising the issue of interest on instalments deferred under the scheme during the moratorium period, was told that paying interest on interest is a double whammy for borrowers. Petitioner Gajendra Sharma has sought a direction to declare a portion of the RBI'sRBI's March 27 notification as ultra vires to the extent it charged interest on the loan amount during the moratorium period.

Senior counsel Rajiv Dutta, appearing for the petitioner Gajendra Sharma who has taken home loan from a bank, assailed the accrual of interests on EMIs even during the moratorium period.

The Centre and the RBI had Tuesday told the apex court that moratorium period on repayment of loans during the COVID-19 pandemic is extendable by two years and several steps have been taken to help the stressed sectors.

Solicitor General Tushar Mehta, appearing for the Centre and RBI, had said that the economy contracted by 23 per cent in the April-June quarter due to coronavirus-related lockdown and restrictions.

The Centre also told the top Court that 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.

RBI, however, came out with a scheme which provides for the extension of the moratorium for two years to certain stressed borrowers, the central government had informed the apex court.

The Ministry of Finance had filed an affidavit before the 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.

The RBI circular on personal loan restructuring states that resolution plans may include rescheduling or deferment of payments, based on an assessment of the income streams of borrowers. "Conversely, the overall tenor of the loan can also be amended in an amended manner. If allowed, the moratorium period will come into force immediately after the moratorium scheme comes into force.