News By/Courtesy: Daksh Dave | 05 Jun 2020 20:08pm IST

HIGHLIGHTS

  • SC
  • RBI
  • Banks

The Supreme Court 's three-judge bench on Thursday took issue with the claim of bank levying interest on loans when the Reserve Bank of India ( RBI) announced a moratorium on loan repayments between March and August 31 due to the lock-down restrictions following the outbreak of COVID-19. The supreme court made a statement at the proceeding of a PIL filed by Gajendra Sharma, a resident of Agra, who requested an exemption of interest charged by a private bank citing a relief previously announced by RBI for payment of EMIs between March and August 31 due to a pandemic.

The petitioner referred specifically to the Reserve Bank's March 27 & May 22 notifications announcing a moratorium on debt payments while allowing banks to impose interest. The bench, comprising Justices Ashok Bhushan, SK Kaul, and MR Shah, said, "On the one hand, you are granting a moratorium (on loans) but you are trying to continue interest. It is much more harmful. "The Court's observation came a day after RBI submitted its reply while opposing Sharma 's plea. The central bank told the apex court: "The RBI does not find it wise or reasonable to pursue a compelled waiver of interest, to threaten the financial stability of the banks that it is supposed to control and to place the interests of the depositors at risk."

However, the court said to the Solicitor-General Tushar Mehta, who appeared for the Ministry of Finance of the Union Government, that: "You have to deal with two aspects – interest accrued during the period of the moratorium and interest accrued by the accumulated interest." The Court asked the Union Government and RBI to jointly prepare a response by 12 June, the next date of the hearing of the case. Earlier, the court admonished the RBI for publishing its affidavit in the newspapers a day before the hearing.

Senior lawyer Rajiv Dutta, who argued on behalf of the plaintiff, drew the attention of the court and alleged that RBI had leaked an affidavit to the media as it tried to sensationalize the case and had even taken a dig at the central bank to back private banks against the citizens' financial woes triggered by the pandemic. In its affidavit, RBI claimed that it had a twin mission to protect the interest of the depositors and to preserve financial stability. "The demand in advances (loans) is an important and essential source of income for banks, allowing them to maintain and remain financially stable and competitive," he said.

THIS ARTICLE DOES NOT INTEND TO HURT THE SENTIMENTS OF ANY INDIVIDUAL, COMMUNITY, SECT, OR RELIGION ETCETRA. THIS ARTICLE IS BASED PURELY ON THE AUTHOR'S PERSONAL VIEWS AND OPINIONS THE EXERCISE OF THE FUNDAMENTAL RIGHT GUARANTEED UNDER ARTICLE 19(1)(A) AND OTHER RELATED LAWS BEING FORCE IN INDIA FOR THE TIME BEING.

Section Editor: Pushpit Singh | 05 Jun 2020 20:56pm IST


Tags : RBI; SC

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