New Delhi | Jagran News Desk: The Centre on Tuesday told the Supreme Court that the loan moratorium was "capable of being extended" under the RBI circular for two years. The top court was hearing a petition seeking waiver of interest on interest for deferred payments of instalments during the moratorium period announced due to the coronavirus lockdown.

Solicitor General Tushar Mehta, appearing for the Centre and the Reserve Bank of India (RBI), told a bench headed by Justice Ashok Bhushan that several steps have been taken for stressed sectors and the economy has contracted by 23 percent due to the pandemic.

The bench said that it would hear on Wednesday the pleas which have raised the issue of interest being charged on instalments which have been deferred under the central bank's scheme during the moratorium period amid the COVID-19 lockdown.

Last week, a bench headed by Justice Ashok Bhushan took note of the Centre's alleged inaction and asked it to clarify its stand within a week on the waiver of interest on interest for deferred EMIs. 

The bench had said that the Centre had not made its stand clear on the issue despite the fact that ample powers were available with it under the Disaster Management Act and was "hiding behind the RBI".   

The top court had earlier said there was "no merit in charging interest on interest" for deferred loan payment installments during the moratorium period announced in wake of the COVID-19 pandemic.

The petition has been filed by Agra resident Gajendra Sharma who has sought a direction to declare the portion of the RBI's March 27 notification "as ultra vires to the extent it charges interest on the loan amount during the moratorium period, which create hardship to the petitioner being borrower and creates hindrance and obstruction in 'right to life' guaranteed by Article 21 of the Constitution of India".

Sharma has also sought a direction to the government and the Reserve Bank of India (RBI) to provide relief in repayment of loan by not charging interest during the moratorium period.

On June 4, the top court had sought the Finance Ministry's reply on the waiver of interest on loans during the moratorium period after the RBI said it would not be prudent to go for a forced waiver of interest risking financial viability of the banks.

The top court had said there were two aspects under consideration in this matter - no interest payment on loans during the moratorium period and no interest to be charged on interest.

It said these were challenging times and it was a serious issue as on one hand, moratorium was granted and on the other, interest was charged on loans. 

Posted By: Abhinav Gupta