SC asks Centre “Why should credit card users get benefit?” under RBI loan moratorium scheme

Petition to Initiate Contempt of Court Proceedings Against RBI Governor and Others

After the Solicitor General Tushar Mehta, appearing for the Central Govt. has contended that the credit card users would also receive ex-gratia payments. And the banks are obliged to transfer the compound interest waiver under RBI’s loan moratorium scheme to eligible borrowers even without the borrower making such demand.

Today, the Supreme Court has asked the Central government “why credit-card users should be entitled to the benefit of compound interest waiver under Reserve Bank of India’s (RBI) loan moratorium scheme?,…. since they are not availing loans but only using the card to purchase goods.”

A batch of petitions was hearing by Three-Judge Bench of Justice Ashok Bhushan, comprising with Justices R. Subhash Reddy & MR Shah. These petitions were filed for charging interest on interest for borrowers who availed of the RBI’s loan moratorium scheme which has introduced in COVID-19 pandemic.

Affidavits were filed by RBI & the Union Finance Ministry separately in the top court admitting that eligible borrowers will be entitled to get the difference between compound and simple interest collected on loans of up to ₹2 crores during the moratorium period. And the said amount will be credited to the eligible borrower’s accounts before November 5 by banks, financial and non-banking financial institutions. To which RBI has directed all banks, financial and non-banking financial institutions to take necessary actions to ensure that the amount is given to eligible borrowers within the stipulated time.

The Central government also submitted that the Finance Ministry had issued a scheme as per which lending institutions would credit this amount to the accounts of borrowers.

Earlier in March, RBI had issued a circular which allowed lending institutions to grant a moratorium on payment of term loans that were due between March 1, 2020, to May 31, 2020, in view of this pandemic. And, later the moratorium was extended till August 31, 2020.

Appearing for Power-generating Companies, Advocate Dr. Abhishek Manu Singhvi has submitted that “the power sector is an essential and abused segment and prayed for tweaking of the circular to make it inclusionary so that the sector could avail the benefits of the scheme.” He also added that there is a need to make certain changes in the circular.

Therefore, the Court has declined to pass any order and directed Singhvi’s client to make a representation before RBI. However, the matter will come up for hearing again next week.

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