Moratorium period on loan repayment extendable by two years: Centre, RBI tell SC

New Delhi: The Centre and Reserve Bank of India (RBI) on Tuesday told the Supreme Court that the moratorium period on repayment of loans amid the COVID-19 pandemic is extendable by two years.

On March 27 the had RBI permitted all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) (referred to hereafter as “lending institutions”) to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020.

In May, the RBI announced extension of loan moratorium by 3 more months to August 31.

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.

The apex court had earlier asked the Centre and the RBI to review the move to charge interest on deferred EMIs during the moratorium period.

Petitioner Gajendra Sharma has sought a direction to declare portion of the RBI`s March 27 notification as ultra vires to the extent it charged interest on the loan amount during the moratorium period.