Banks Free to Restructure Loans, but Can’t Penalise Borrowers Availing Moratorium Benefit, SC Told

Senior counsel Rajiv Dutta, appearing for the petitioner Gajendra Sharma who has taken home loan from a bank, assailed the accrual of interests on EMIs even during the moratorium period. RBI came out with the scheme and we thought that we will be paying the EMI after the moratorium period and later we were told that compound interest would be charged and it will be double whammy for us as we will be paying interest on interest, Dutta told the bench.

They have given so much relief to banks and we are not given any relief in actual terms, he said, adding that there is no default on my (petitioner) part and we cannot be penalized for availing a scheme by being charged the interest on interest.

Dutta claimed that Reserve Bank of India (RBI) is a regulator and not an agent of banks and borrowers are being penalised during the COVID-19 times. Now the government is saying that they will restructure the loans. You restructure but don’t penalise the honest borrowers, he said. Senior advocate C A Sundaram, appearing for Confederation of Real Estate Developers’ Associations of India (CREDAI), told the bench that moratorium should be extended for at least six months. If interest can’t be waived, then please reduce it to a level on which banks pay their depositors, he said.

Sundaram referred to the August 6 circular of RBI which gave power to banks to decide on moratorium to industries. The Centre and the RBI had Tuesday told the apex court that moratorium period on repayment of loans during the COVID-19 pandemic is extendable by two years and several steps have been taken to help the stressed sectors.