Common man's Diwali in Centre's hands now: SC on loan moratorium
New Delhi, Oct 14: The Supreme Court on Wednesday rejected the government's plea for a month's time to take a call on the interest waiver on loans of upto Rs 2 crore, asked when the government has already reached a decision, why should it take so long to implement it.
The three judge bench comprising of Justices Ashok Bhushan, R Subhash Reddy and MR Shah on Wednesday said that the government must not delay the implementation any further.
Justice Shah, on a lighter note told Mehta that their (common persons') Diwali is in government's hand now. The Bench indicates that they will list the case on November 2, 2020 and says that they expect the government to come back with an appropriate decision.
The top court is hearing the petitions, including the one which has sought a direction to declare the portion of an RBI notification, issued on March 27, "ultra vires to the extent it charges interest on the loan amount during the moratorium period..."
The Reserve Bank of India (RBI) filed an affidavit in the apex court recently saying that loan moratorium exceeding six months might result in "vitiating the overall credit discipline", which will have a "debilitating impact" on the process of credit creation in the economy.
Separately, the Centre has also filed an affidavit saying that going any further than the fiscal policy decisions already taken, such as waiver of compound interest charged on loans of up to Rs 2 crore for six months moratorium period, may be "detrimental" to the overall economic scenario, the national economy and banks may not take "inevitable financial constraints".
These affidavits were filed following the top court''s October 5 order asking them to place on record the K V Kamath committee recommendations on debt restructuring because of the COVID-19 related stress on various sectors as well as the notifications and circulars issued so far on loan moratorium.
In its affidavit, the RBI has said that any waiver of interest on interest would entail "significant economic costs" which cannot be absorbed by the banks without serious dent of their finances, and this, in turn, would have huge implications for the depositors and the broader financial stability.
It has also said that the apex court's interim order of September 4, restraining classification of accounts into non-performing accounts in terms of the directions issued by the RBI, may kindly be vacated with immediate effect.
Earlier, the Finance Ministry had filed an additional affidavit in the apex court on October 2 saying it had decided to waive compound interest (interest on interest) charged on loans of up to Rs 2 crore for a six-month moratorium from individual borrowers as well as medium and small industries.
The Kamath panel had made recommendations for 26 sectors that could be factored by lending institutions while finalising loan resolution plans and had said that banks could adopt a graded approach based on the severity of the coronavirus pandemic on a sector.
Initially, the RBI on March 27 had issued the circular which allowed lending institutions to grant a moratorium on payment of instalments of term loans falling due between March 1, 2020, and May 31,2020, due to the pandemic.
Later, the period of the moratorium was extended till August 31 this year.