EMI Moratorium: SC breather to customers, directs government to implement decision to forego interest on loans

The Supreme Court on Friday heard petitions seeking interest waiver during the loan moratorium period. A bench headed by Justice Ashok Bhushan said the COVID-19 pandemic has not only caused serious threat to the health of the people but has also cast its shadow on the economic growth of the country along with other countries of the world.

After the hearing, the apex court directed the government to make sure that all steps be taken to implement its decision to forego interest on eight specified categories of loans paid upto rupees two crore in view of the coronavirus pandemic.

The eight categories of the loans include MSME (Micro, Small & Medium Enterprises), Education, Housing, Consumer durable, Credit card, Automobile, Personal and Consumption.

The bench comprising of Justices Ashok Bhushan, R Subhash Reddy and MR Shah will resume hearing the matter on December 2, when it will most likely conclude the hearing.

Timeline of what happened till now

The RBI had on March 27 issued the circular which allowed lending institutions to grant a moratorium on payment of instalments of term loans falling due between March 1, 2020, and May 31, 2020, due to the pandemic.

Later, the moratorium was extended till August 31 this year.

The pleas pertained to charging of interest on interest by banks on EMIs which have not been paid by borrowers after availing the loan moratorium scheme of RBI during March 1 to August 31.

The SC had on September 3 instructed banks not to declare accounts as non-performing assets (NPAs) until further orders.

The Centre in October said that it would waive compound interest on the repayment of loans of up to Rs 2 crore in some categories, a move that would provide relief to individual and MSME borrowers.

The top court had on November 19 directed Centre and RBI to reply to suggestions put forth before the bench. The SC also disposed off petitions in which the petitioners are satisfied with compound interest waiver.

The SC has previously said there is 'no merit in charging interest on interest'.

The top court's judgement came on a PIL filed by Agra resident Gajendra Sharma seeking directions to declare the notification dated March 27, 2020 issued by Reserve Bank of India as ultra vires to the extent it charges interest on the loan amount during the moratorium period.