Government Suggests Extension of Loan Moratorium by 2 More Years

We all are aware that the Reserve Bank of India (RBI), with the government’s consent, tried to address the financial damage caused due to the pandemic as well as the nation-wide lockdown through loan moratoriums. Though the scheme was initially introduced for three months, it was then extended to another three months until 31 August 2020. Further, the government today expressed to the Supreme Court (SC) that loan moratoriums can be extended by two years.

A petition was filed by Gajender Sharma and advocate Vishal Tiwari seeking at the Supreme Court seeking an extension of the moratorium period. The petition intended to help borrowers by requesting for deferment of their EMI payments towards term loans during the pandemic period. A bench has been set up to judge the case, comprising Justice Ashok Bhushan.

Mr Tushar Mehta, the Solicitor General representing the government, shared with the Supreme Court regarding the ongoing discussions between the regulator and the bankers’ association on the waiver of interest on loan dues during the moratorium period. Besides, there are more issues associated with the problem as GDP has dropped 23% and the economy is under stress.

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The Solicitor General stated that Mr Harish Salve has also spoken to the bankers’ association regarding the issue at hand and that most of the concerns are addressed. The hearing is scheduled to be held on Wednesday, i.e. 2 September 2020.

Today’s hearing was in response to the query let out by the Supreme Court last week about the government’s stand on waiving interest on loan repayments during the moratorium period. The SC commanded that the government cannot hide behind the central bank to state its stand. On the other hand, the central bank had proclaimed that an interest waiver on term loans can negatively affect the financial health and stability of banks, and may put them at risk.

For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in

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