The Supreme Court on Tuesday refused to extend the six-month loan moratorium period offered by the Reserve Bank of India (RBI) last year, saying that it is ‘policy decision’ on the part of the Centre and RBI. Delivering its verdict on a batch of petitions seeking extension of the loan moratorium period and other reliefs, the bench headed by Justice Ashok Bhushan said the top court cannot do judicial review of the Centre’s financial policy decisions unless they are malafide and arbitrary.
On March 27, the RBI had announced a moratorium on loan instalments due between March 1 and May 31 and subsequently extended it by three months till August 31, 2020.
The loan relief was meant for personal, housing, education, auto and consumer durables loans, loans to micro, small and medium enterprises (MSME), besides loans to micro, small and medium enterprises (MSME) and credit card dues, subject to applicable conditions.
The top court also said that a complete waiver of interest during the moratorium period could not be granted as banks have to pay interest to account holders and pensioners.
The government was opposed to waiver of interest during moratorium period as it would burden the banks with an estimated amount of ₹ 6 lakh crores. However, it had proposed waiving of compound interest for loans up to ₹ 2 crores for six categories of borrowers.
The Supreme Court directed that no compound or penal interest shall be charged from borrowers for the six-month loan moratorium period and the amount already charged shall be refunded, credited or adjusted.