Supreme Court Directs Reserve Bank to Oversee Moratorium

On Thursday, the Supreme Court directed the RBI to ensure that the three-month moratorium rule is being heeded by all banks. The 3-month loan moratorium scheme was formulated by the Reserve Bank of India on 27th March. It granted customers the choice to pay their EMIs after a 3-month grace period. This was done keeping in mind that many people are under considerable financial stress due to the pandemic and lockdown.

In the Supreme Court, the three judge bench which was headed by Justice NV Ramana heard this case with videoconferencing. The bench sought a response from Tushar Mehta, the Solicitor General, as to the state of borrowers regarding the moratorium. Are they getting the benefits which were granted by the RBI for this lockdown period?

The 3-judge bench also comprised BR Gavai and Sanjay Kishan Paul. They oversaw and disposed of several petitions that challenged the 27th March RBI circular. The petitioners were of the opinion that they were not of the aggrieved party and therefore they could not interfere.

These were disposed because the bench was of the opinion that none of the petitioners had a loan running case. The petitioners said that the plea was for the good of the public, but this was dismissed by the bench.

Per petitioner, the three month moratorium period will see the interest getting accumulated. This will continue to accumulate unless the customer starts repaying. Petitioners said that interest should not be charged during the moratorium period since people are already facing challenging situations. If customers have to pay an additional interest on top of the regular EMIs, it can be a big problem to the borrowers.

As per RBI decision, banks and NBFCs are to give a 3 month moratorium period to their term loan customers. This is to be for all term loans whose installments are due between 1st March and 31st May. Term loan is the blanket term for home loan, vehicle loan, agricultural loan, personal loan, and crop loan. RBI also said that credit card dues also come under the moratorium. The moratorium facility will be given for both principal and interest payment, and this means that the moratorium is on the EMI totally. 

A Moratorium entails that you do not need to pay your EMIs for the time being, and there shall be no penalties charged. This is by no means a concession. It is a deferment of payments for giving relief to borrowers who face problems of liquidity.