The Finance Ministry said Thursday that it has established a committee of experts to assess the impact of the “waiver of interest and waiver of interest on interest” of the COVID-19 moratorium on the economy and suggest measures to provide relief to borrowers.
The committee comprised of former chairman of the Auditor General of the Comptroller (CAG) Rajiv Mehrishi, former member of the monetary policy committee (MPC) Ravindra H. Dholakia and former managing director of the State Bank of India (SBI) and IDBI Bank B. Sriram will submit his report within one week.
“The terms of reference include measuring the impact on the national economy and financial stability of the interest exemption and the interest exemption on interest in the moratorium related to covid-19. Suggestions to mitigate the financial constraints of various sectors of society in this regard and measures to be taken in this regard, “said an official statement. The SBI will provide secretarial support to the panel. The panel may also consult banks, stakeholders for this purpose.
“Various concerns have been raised during the ongoing hearing proceedings in the Honorable Supreme Court of India, in the matter of Gajendra Sharma v. UoI and Others, on the matter related to the relief requested in terms of exemption from interest and exemption from interest on interest and other related issues, “said the Ministry of Finance.
The development comes against the backdrop of the Supreme Court adjourning the ongoing moratorium case for the last time. It gave the Center, the Reserve Bank of India (RBI) and the banks two weeks time to work together and present a concrete response on their position on the exemption of interest charged during the loan default and related issues. The court also ordered the provisional extension of the loan moratorium until September 28 and ordered banks not to label any loans as delinquent until new orders are issued.
The bench of three judges took note of the presentations made by Attorney General Tushar Mehta, on behalf of the Center. He noted that the government at the highest level is considering all the issues in this batch of allegations related to the loan default. The government will present a concrete response within two weeks, considering all sectors in a comprehensive manner.
On May 22, the central bank extended the moratorium on term loans until August 31 to mitigate the financial difficulties of citizens, amid a national blockade due to covid-19. In March, the central bank had allowed a three-month moratorium on the payment of IMEs and other loans on the payment of all term loans due between March 1 and May 31, which was extended to another three months .
Petitioner Gajendra Sharma presented in his petition that interest would continue to accrue during the moratorium, which the borrower would ultimately have to pay. The petitioner argued that no interest should be charged during the moratorium because people are facing “extreme hardship.” The petition also indicated that it would be difficult to pay additional interest in addition to the regular EMIs.
According to the March 27 RBI circular, banks and other financial institutions can set a three-month moratorium on all installments on term loans that are due between March 1 and May 31. Term loans will include all types of retail loans, such as auto loans, home loans and personal loans, agricultural term loans, and agricultural loans. The central bank has clarified that credit card fees will also be eligible for the moratorium. The moratorium will be provided for both interest and principal repayment, which means the moratorium applies to all of your EMI.
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