India’s apex court on Wednesday slammed the central government for hiding behind platitudes while banks stand to profit by charging higher interest rates under the moratorium scheme for those who can’t pay back loans due to the COVID-19 pandemic.
Slamming the Prime Minister Narendra Modi-led government, the Supreme Court of India sought to remind it that the imposition of lockdown had impacted both business and banks.
The prime minister announced a national lockdown on 24 March as a measure to contain the spread of Covid-19.
A three-month loan moratorium scheme was announced by country’s top bank - the Reserve Bank of India (RBI) - on 27 March, two days after the imposition of the lockdown. The scheme was then extended by three months.
As per the scheme, debtors were allowed a six month repayment holiday until 31 August.
But the interest on the loan kept accumulating and all those who had availed themselves of the scheme, are now being expected to pay the six month dues with interest on 31 August.
A plea was filed on charge of interest on loans under moratorium in May after which the court sought the RBI’s reply. The top bank told the apex court that the interest cannot be waived.
Coming down heavily on the government for not clarifying its stance on the interest waiver, the apex court said that the government "cannot hide" behind the RBI.
During the hearing, the government said waiving the interest will be detrimental to the interests of businesses and banks.
Reacting to the government's statement, the Supreme Court’s bench said: "This happened because you locked down the entire country. You cannot be interested only in business and not about the sufferings of people.”
In earlier hearings on the matter, the RBI told the court that foregoing interest will lead to loss of about $20 billion, around one percent of the country’s annual Gross Domestic Product. The petitioner in the case wants the interest payable under moratorium to be waived, saying that it will create “hardships” for individuals and businesses.