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You have the power, don’t just depend on RBI, SC tells Centre on loan moratorium

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New Delhi, Aug 26: The Supreme Court on Wednesday pulled up the Centre for not taking a stand on giving moratorium on charging interest on loan as well as interest on interest during the same period declared during pandemic.

You have the power, don’t just depend on RBI, SC tells Centre on loan moratorium

"You make your stand clear. You can not say anything. It is your responsibility to take steps under the Disaster Management Act. You have enough powers to decide the issue of waiver. You cannot just depend on the RBI," a bench comprising Justices Ashok Bhushan, R Subhash Reddy and M R Shah said.

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"This isn't the time to take care of only the business interests but you must also consider the plight of the people. That's how RBI's stands look like and you are not taking any stand at all," the top court observed.

"There are two issues here. Whether any interest should be charged and whether any interest on interest should be charged during the moratorium period," it said.

The apex court granted time to the government after Solicitor General Tushar Mehta sought a week''s time to file a response.

"My Lordships may not say that. We are working in coordination with RBI," Mehta said.

The bench, also comprising Justices R Subhash Reddy and Justice M R Shah, asked the solicitor general to clarify stand on the Disaster Management Act and whether additional interest on existing interest could be accrued.

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    Mehta argued that there cannot be a common solution for all the problems.

    Senior advocate Kapil Sibal, appearing for the petitioner, informed the bench that the loan moratorium''s deadline would end on August 31 and sought its extension.

    "I am only saying that till these pleas are decided, the extension should not end," Sibal said.

    The apex court has now posted the matter for hearing on September 1.

    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 bench was hearing a plea 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 creates 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.

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