“Hiding behind the RBI.”: Is Supreme Court Accusing Government for Creating Economic Turmoil?

This Wednesday, honourable Supreme Court said, Due to Government decision to enforce strict lockdown has greatly increased the problem with India's economy amid the global pandemic situation, the time when everyone citizen is facing huge financial loss or unemployment.

The court simple wished to know whether the postponement of loan interest to prop up borrowers through their financial crisis during the national lockdown will lead to an increase in further interest once the freeze is to be lifted on August 31. However, The government has still not filed its affidavit.

Gajendra Sharma has challenged the charging of interest rate on loans even during the three-month moratorium period declared amid the Covid-19 pandemic and national lockdown. While hearing the loan moratorium (meaning temporary prohibition of any law) petition filed by him, a Supreme Court Bench constituting Justices Ashok Bhushan and MR Shah asked the Centre to clear its stand on additional interests charged by the banks during the moratorium period and asked why it had not yet filed an affidavit or cleared its stand in this matter.

The Bench of Supreme Court said, "You clear your stand. You say RBI has taken a decision, we have gone through RBI reply but Centre is hiding behind the RBI." The court also said the government is empowered now to take a free stand under the Disaster Management Act, read more about it on twitter via clicking here

The Supreme Court Bench asked the Centre's representative in this case, Solicitor General Tushar Mehta, to give a timeline within which time period it will file the affidavit in the loan moratorium case. On this account, Mehta sought a time extension of a week to file the affidavit.

"The problem was created by your lockdown... It appears Union of India is not taking an independent stance and is relying on the Reserve Bank of India (RBI)... This is not the time to look after business only, consider providing relief," a Bench led by Justice Ashok Bhushan addressed Solicitor Mehta.

Expressing concern about the current economic situation, Justice MR Shah even told Mehta that this is not the time for the Centre to think about "business". The court had been trying to strike a balance between the interests of the bans and the borrowers.

The Supreme Court had last heard the plea of this loan moratorium case on June 17. During the hearing, the top court had asked the government to interfere in the matter and also questioned charging of additional interest by banks during the loan moratorium period.

The court had earlier made their position clear that they were concerned only about charging of "interests on interest" for those who had opted for the loan moratorium. The bench while hearing the plea challenging the levy of interest on loan repayments during the moratorium, said the government cannot "leave everything to be decided by banks." To read more such articles, click here

On the other side, appearing on the behalf of a petitioner in this case, senior advocate Kapil Sibal said, "Moratorium period is ending on August 31. September 1 onwards, we will all be in default. These loans will then become NPAs. It will create a bigger issue." ''Till these issues are decided the moratorium should continue. The RBI governor has made a statement that next quarter will be as bad as this quarter because the economy is not recovering," he added.

The Government of India has been allotted a week time by the Supreme Court so that they can clarify their stand in this matter. The case will now be listed on September 1 for further hearing.