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Supreme Court orders RBI and Ministry of Finance to implement loan moratorium rules

With COVID 19 being declared as a pandemic by the World Health Organisation, Ministry of Finance and the RBI collectively took decisions to ease the issues faced by borrowers which were not implemented to their best, the Apex Court orders for further implementation.  This remarkable judgement was passed by the bench of the Supreme Court, consisting of Justice Ashok Bhushan, Justice R Subhash Reddy and Justice M.R. Shah in the matter of Gajendra Sharma v Union of India & Anr., [WRIT PETITION (CIVIL) NO.825 OF 2020].

In light of the World Health Organisation declaring COVID 19 as a pandemic and the Indian government taking steps for it in light of the Disaster Management Act, 2005, the Ministry of Finance instructed the RBI to relax the stringent loan repayment rules for a period of six months. The petitioner had taken a loan of rs. 38 lakhs, approximately from ICICI Bank but due to the lockdown imposed by the government, the income of many individuals had been adversely affected, including the petitioner.

On the filing of this petition, the RBI clarified that scheme was launched under the name of “Scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts (1.3.2020 to 31.8.2020)”, wherein a moratorium period was imposed for six months keeping in mind the severe financial crunch the pandemic had caused. It also listed down the following measures it took in order to ease the rules for borrowers.

“The following borrowers were declared eligible for the benefit of waiver of ‘interest on interest’:

(i) MSME loans up to Rs. 2 crore

(ii) Education loans up to Rs. 2 crore

(iii) Housing loans up to Rs. 2 crore

(iv) Consumer durable loans up to Rs. 2 crore

(v) Credit card dues up to Rs. 2 crore

(vi) Automobile loans up to Rs. 2 crore

(vii) Personal loans to professionals up to Rs. 2 crore

(viii) Consumption loans up to Rs. 2 crore.”

 The apex court held, “Inspite of the moratorium period being imposed, borrowers were still expected to pay interest and EMI on their loans, which defeats the whole purpose of a moratorium period. Shri Rajiv Dutta, learned senior counsel for the petitioner has expressed its satisfaction on the measures taken by the Government of India redressing grievances of the petitioner to the extent as noted above. The Union of India having taken specific measures vide its circular dated 23.10.2020, which has been brought on the record and follow-up measures have also been taken in consequence thereof, we dispose of the present writ petition with directions to the respondents to ensure that all steps be taken to implement the decision dated 23.10.2020 of the Government of India, Ministry of Finance so that benefit as contemplated by the Government of India percolates to those for whom the financial benefits have been envisaged and extended. All IAs, impleadment applications stand disposed of”.

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