SC seeks RBI response on plea against interest on deferred EMIs

The Supreme Court sought the RBI’s response on a plea challenging charging interest on loans, even after the central bank ordered a three month moratorium on the payment of EMIs.

The plea has termed this unconstitutional, as during the lockdown, people’s income have already shrunk and they are facing financial hardships. According to a circular, the RBI is allowing financial institutions to allow customers a moratorium on loan instalments that fall between March 1 and May 31.

Senior advocate Rajiv Dutta, representing Gajendra Sharma, contended before a bench of Justices Ashok Bhushan, S.K. Kaul and B.R. Gavai that due to the imposition of the nationwide lockdown, means of livelihood are under stress, and the petitioner has no means to earn as he cannot continue to work. And, during these circumstances, if interest charges are imposed during the three month moratorium, then it will defeat its purpose, argued the petitioner.

The bench said: “Solicitor General Tushar Mehta is present in the court. He seeks time to take instructions. List after two weeks. In the meantime, Solicitor General may obtain instructions...” The petitioner’s counsel argued that interest charges during the period of moratorium will be adjusted into the EMIs during the three-month period, and this process would eventually put the debtor under financial hardship. These additional interest charges violate the principle of natural justice, as the government has already limited the opportunities to earn income and then the debtor has to pay interest charges during the moratorium, contended the petition.