New Delhi: Banks are free to restructure loans, but cannot penalize honest borrowers by charging interest on deferred EMI payments under the moratorium scheme during the COVID-19 pandemic, said a petitioner opposing the measure in court. Supreme on Wednesday.
A bank headed by Judge Ashok Bhushan, which initiated the final hearing on a series of allegations raising the question of interest on deferred installments under the scheme during the moratorium period, was told that paying interest on interest is a “double whammy” for borrowers.
Lead counsel Rajiv Dutta, who appeared on behalf of petitioner Gajendra Sharma, who applied for a mortgage loan from a bank, attacked the accrual of interest on EMIs even during the moratorium period.
“RBI came out with the scheme and we thought we will pay the EMI after the moratorium period and later we were told that compound interest would be charged and it would be a double whammy for us as we will pay interest on the interest.” Dutta told the bank.
“They have given so much relief to the banks and they have not given us any relief in real terms,” he said, adding that “there is no non-compliance on my part (petitioner) and we cannot be penalized for using a scheme with the charge of interest on interest ”.
Dutta claimed that the Reserve Bank of India (RBI) is a regulator and “not an agent of banks” and borrowers are being penalized during the times of COVID-19.
“Now the government says they will restructure the loans. Honest borrowers are restructured but not penalized, ”he said.
Lead advocate CA Sundaram, appearing with the Confederation of Real Estate Developers Associations of India (CREDAI), told the court that the moratorium should be extended for at least six months.
“If you can’t waive interest, please lower it to a level where banks pay their depositors,” he said.
Sundaram referred to RBI’s Aug. 6 circular that gave banks the power to decide on the moratorium on industries.
The Center and the RBI had told the supreme court on Tuesday that the moratorium period on loan repayments during the COVID-19 pandemic is “extendable” for two years and several measures have been taken to help stressed sectors.
Attorney General Tushar Mehta, who appeared for the Center and the RBI, had said the economy contracted 23 percent in the April-June quarter due to the lockdown and restrictions related to the coronavirus.
The Center also told the superior court that the waiver of interest on deferred EMI during the moratorium period would be against “basic finance royalties” and would be unfair to those who repaid the loans on schedule.
However, the RBI presented a plan that provides for the extension of the moratorium for two years to certain stressed borrowers, the central government informed the high court.
The Finance Ministry had filed an affidavit with the court that had requested the Center and the RBI to review the measure to charge interest on EMIs and interest on interest during the moratorium period introduced under the scheme due to the COVID pandemic. -19.
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