New Delhi, September 1: Solicitor general Tushar Mehta told the Supreme court on Tuesday that the moratorium period for repayment of loans is capable of being extended up to two years as per the RBI’s circular.

Mehta, representing the Centre and the RBI, submitted, “We are in the process of identifying the distressed sectors to vary benefits as per the impact of hit they have taken.” The Centre also apprised the bench that it has filed a reply as to its powers under the Disaster Management Act.

The apex court on August 26 had lashed out at the Central government for not filing the affidavit in time with respect to the government’s decision on whether interest can be waived or, whether it can stop charging interest on interest accrued during moratorium period. 

The Centre had to clarify its position under the Disaster Management Act (DMA) and file an affidavit entailing its power.

Mehta suggested that a meeting of representatives of Central government with RBI and other banks should be held to come up with a proper solution. Mehta said, “Senior advocate Harish Salve has also spoken to bankers association and most issues have been resolved.”

The bench headed by Justice Ashok Bhushan said, “We are hearing this from past three dates of hearing. The country is going through a problem, we will hear this issues tomorrow at 10:30 am,” Livemint reported.

The court shall hear at length the bunch of petitions demanding waiver of interest, or waiver of interest on interest on the suspended EMIs during moratorium period on Wednesday morning.

The RBI had on May 22 extended moratorium on term loans till 31 August amid the nationwide lockdown due to Covid-19. In March, the central bank had allowed a three-month moratorium from paying EMIs and other loans on payment of all term loans due between March 1 and May 31.

Petitioner Gajendra Sharma said, during the three-month period, the interest would continue to accrue during the moratorium, which ultimately the borrower would have to pay. The petitioner argued that no interest should be charged during the moratorium because people are facing “extreme hardship”. The petition also stated that paying additional interest on top of regular EMIs would be difficult.

As per the 27 March RBI circular, banks and other financial institutions are permitted to provide a moratorium of three months for all term loan instalments which are due for payment between March 1 and May 31. Term loans will include all kinds of retail loans such as vehicle loan, home loan, and personal loan, agricultural term loans as well as crop loans. The central bank has clarified that credit card dues will also be eligible for the moratorium. The moratorium will be provided for both interest as well as principal repayment, which means the moratorium is on your entire EMI.

Moratorium basically means you don’t have to pay your EMIs for that time period and no penal interest will be charged. It is not a concession of any kind and is simply a deferment of the payment to provide some relief to borrowers facing liquidity issues.

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