The Supreme Court on Wednesday pulled up the Centre for allowing banks to charge interest on interest despite the Reserve Bank of India granting moratorium on loan repayments and EMIs, not once but twice, on March 27 and May 22, in view of the pandemic.
On the Centre pleading that the waiver of interest would impact businesses and banks, Justice Ashok Bhushan flared up saying, "The problem was created by you (the Centre), because you locked down the entire nation. He added: "Of what use is a moratorium if people have to pay interest even during this period? This isn't the time to take care of only business interests; but you must also consider the plight of the people."
Asking the government not to hide behind the RBI, the Bench put it on notice and sought a firm reply by September 1 "whether any interest should be charged and whether any interest on interest should be charged during the moratorium period."
"It is your responsibility to take steps under the Disaster Management Act. You have enough powers to decide the issue of waiver of interest," justice Bhushan said when Solicitor General Tushar Mehta referred to the RBI's affidavit in the matter, and said the banking institutions are also distressed.
Earlier in June, RBI had filed an affidavit before the Apex Court stating that it would not support the move to waive off interest, as it could affect the financial viability of banks. The moratorium announced by the RBI expires on August 31.
The court was hearing a petition file dby Agra resident Gajendra Sharma that the government must honour the waiver of interest charged by banks as what use is a moratorium if one has to pay not only interest on loan but also interest on the interest.