The Supreme Court on Tuesday declined to extend the six-month loan moratorium period offered by the Reserve Bank of India (RBI) last year, citing the Centre’s and RBI’s ‘policy decision.’ The bench led by Justice Ashok Bhushan said the top court cannot do a judicial review of the Centre’s financial policy decisions unless they are mala fide and arbitrary in its decision on a batch of petitions requesting an extension of the loan moratorium period and other reliefs.
The RBI declared a three-month moratorium on loan payments due between March 1 and May 31 on March 27, and it was further extended by three months until August 31, 2020.
Personal, housing, education, auto, and consumer durables loans, as well as loans to micro, small and medium enterprises (MSME) and credit card dues, were eligible for the loan relief, which was subject to certain terms.
The top court also stated that banks would pay interest to account holders and pensioners during the moratorium period, so a full waiver of interest could not be awarded.
The government opposed interest waivers during the moratorium period because it would cost the banks an estimated Rs. 6 lakh crores. It had recommended, however, that compound interest be waived for loans up to 2 crores for six types of borrowers.
For the six-month loan moratorium period, the Supreme Court ordered that no compound or punitive interest be charged to borrowers and that the amount already charged be refunded, credited, or modified.
The court also dismissed the customers’ request for an extension of the Reserve Bank of India’s six-month loan moratorium imposed due to the coronavirus pandemic.
According to Bar and Bench, the bench also refused the creditors’ request for sector-specific reliefs from the RBI, as well as reliefs outside the packages already offered.
The extent and manner in which economic packages and reliefs should be supported fall within the executive’s purview, according to the bench. The order said, “The court will not inquire whether public policy is prudent or whether the better policy can be evolved.” “Economic and fiscal policies are not subject to judicial review, and a sector’s dissatisfaction with a policy decision cannot justify interference unless the policy decision is based on malfeasance and arbitrariness.”
The court also noted that the government had incurred losses in GST revenue as a result of the pandemic. “It cannot be said that the Centre has not taken steps in the context of Covid-19, based on the various steps taken by the Centre and RBI,” the bench noted.
After hearing the petitioners, the Centre, the RBI, and the intervenors on December 17, the court reserved its decision.
