Due to the worldwide Pandemic, RBI on 27th March issued a circular to allow banks to allow the borrowers a moratorium on installment payments for a period of three months which was extended till 31st of August.
The Supreme Court raised a question as to whether an interest shall be charged if the moratorium benefit is being availed by the customer.
Petitioner Gajendra Sharma moved the Supreme Court stating that if the interest is charged during these months then the grant of moratorium is futile.
The RBI cleared out the issue answering questions of the Court stating that there shall be no waiver of interest.
RBI stated that “lending institutions may, at their discretion, convert the accumulated interest for the deferment period up to August 31, 2020, into a funded interest term loan (FITL) which shall be repayable not later than March 31, 2021.”
RBI further stated that in case of interest waiver the Banks will not be financially stable and the RBI being the custodian of these Banks could not allow that.