The moratorium means a legal authorization to debtors to postpone payment. However, the moratorium for payment of EMI, etc. as announced by the Government of India seems to be eyewash. As per Reserve Bank of India (RBI) announcement, there is a moratorium period, which earlier was up to 31.05.2020 and now it is till 31.08.2020. Due to the complete national lockdown due to the COVID-19 pandemic, the Banks are bound to follow the guidelines and announcements of the Government for a moratorium on all kinds of instalments be it EMI or payment of Credit Cards.
It was made clear that interest would be charged on amount of moratorium. This is regardless of the fact that since lockdown till date (notwithstanding un lockdown period Phase 1 & 2) neither any Industry nor business or professional work is on track or giving return. Rather during un lockdown period, the COVID-19 Patients have increased and now the figure has crossed 6 Lacs with deaths of above 17800 people.
The Banks’ representatives are unreasonably giving calls ask the reason for moratorium and advice the customers to make the payment of EMI. This is significant to note that the un lockdown period has not given any relief to the industry, business, or professional community rather has augmented the panic of the pandemic. When there is no work, the opening of business or offices has troubled them more than an advantage.
The Banks would charge interest on interest, the matter of which has gone up to Apex Court, which has put the ball in Government’s Court and the Government has not come out with any specific answer to date. It is worth noting that the Apex Court has observed “Once the moratorium is fixed then it should serve the desired purposes and we see no merit in charging interest on interest”.
“Why do you (Centre) think that people are not accepting moratorium (on loan repayment)? Because they do not see any benefit in it. The Centre and RBI cannot throw up their hands now saying this is something between banks and the public at large”.
“We are saying you may charge interest on the principal amount but not on the interest that is getting deferred”.
The Court’s remarks come during the hearing on a petition filed by Agra resident Gajendra Sharma who challenged RBI’s March 27, 2020, and May 22, 2020 notifications announcing moratorium on loan while permitting banks to levy interest. Under the scheme, the three month moratorium on EMIs from March-May was further extended till August 31.
The Solicitor General Mr. Tushar Mehta agreed to convey the concerns of the court to the government and have a relook on the possible solution.
“The directions have been sought to the government and the Reserve Bank of India (RBI) to provide relief in re-payment of loan by not charging interest during the moratorium period from the Apex Court.”
The moratorium has also been announced for payment of monthly bills for the Credit Cards, with a rider that interest would be charged by the Banks or the Credit Card provider. There have not been any specific instructions by the Government, what interest the Bank’s would charge during the moratorium period for the payment of EMI.
The Credit Card Companies/Banks are giving messages that moratorium is allowed, however, it would charge an interest of 3.36{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} per month during that period. Resultantly, the Credit Card holder for taking benefit of moratorium has to pay an interest of 40.32{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} per annum with 18{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} GST i.e. 7.2{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} totalling to 47.58{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} p.a. and if monthly compounded it would be over 59.48{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} pa (including GST). The Government has not given any waiver on payment of GST on such interest payment.
It has not been made clear that whether this 47.58{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} or 59.48{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} would be charged on the non-payment of that monthly Bill or the total outstanding amount, as on date, which in fact is being charged. Even if any person is not taking benefits of moratorium then also the same interest rate the Credit Card Companies/Bank do charge? Then what is the benefit of Central Government announcements/RBI guidelines for non payment of EMIs/credit card bills during moratorium period? It is totally high headedness of the Credit Card Companies/Banks or the non-clear Policy of the Government. It seem that there is no benefit at all specified or agreed to be passed on the customers, who are facing the financial tribulations owing to first lockdown and even under the un lockdown period.
Everyone is conscious that there is no work and income at all. But, this exorbitant interest has put more burdens on the credit card holders. The Government must have considered this fact sympathetically and come out with specific guidelines that either interest would not be charged during moratorium period on monthly credit card bills or, if, interest would have to be charged that should not be more than 7-8{551c903f756d5bf12b7d58e2eb1e8b74af35058efa7a05d3e7b41e9147979503} p.a. only on the monthly outstanding amount of the credit cards and not on the total amount outstanding without any compounding with a waiver of GST.
The interest payable on the said outstanding amount should be termed as “MTL” payable in monthly instalment after a gap of one year down the line. The Private Banks/NBFCs/National Banks, who have issued Credit Cards, shall not act like “Sahukars” and Credit Card issuing Banks be directly instructed to do so instantaneously.
The regulatory dispensations permitted by the Reserve Bank of India vide the aforesaid circulars dated March 27, 2020 which subsequently stood modified on April 17, 2020 and May 23, 2020 were with the objective of mitigating the burden of debt servicing brought about by disruptions on account of Covid-19 pandemic and to ensure the continuity of viable businesses.
The RBI said that in order to ameliorate the difficulties faced by borrowers in repaying the accumulated interest for the moratorium period, on May 23 it had announced that in respect of working capital facilities, 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 and why it is not on non payment of credit card bills.
But, the discretion should not be in the interest of the Banks, but in the interest of Crores of people. The Banks may earn its profitability from other sources, whereas, the general public has no other source of income and cannot in any way burden itself more due to high headedness of the Banks by charging exorbitant interest.
It is important to note that the Supreme Court on Wednesday said charging interest on loans during the period of moratorium would defeat the very purpose of the scheme, giving the government three months to review its position on the issue.
Whether, the profitability of the Banks is primary? The economic interest cannot be higher than the health and interest of the people. Whether, the Banks should earn profit while rest of the Country and its people goes down during the pandemic? Whether the levy of interest on Credit Card payment or loans for the period of the moratorium is vital? It is not prudent to charge interest from the common man suffering due to COVID-19 threat and even, if, there is any financial burden on the Banks, the Government must consider the same in the overall interest of the common man. There must be a mandate in favour of the common man. Let it be a waiver, and risking the financial viability and stability of the Banks.
Thus, a voice must be raised by us against charging of interest.