Can’t allow extension of loan moratorium period, says SC; waiver of interest not possible

The Supreme Court on Tuesday rejected the pleas from numerous commerce associations and company our bodies to increase the six-month loan moratorium interval supplied by the Reserve Bank of India, including {that a} full waiver of interest through the moratorium can’t be granted both.

The SC mentioned no route could be issued to the government or RBI to announce any explicit monetary packages or reliefs, and held that it can not subject instructions to offer aid to explicit sectors over and above others as govt has additionally misplaced income and had its personal contraints.

The apex court docket moreover directed that there shall be no interest on interest or penal interest on any quantity through the loan moratorium from any borrower. Interest on interest charged to date might be adjusted in subsequent EMI and compound interest might be charged in instances of willful default.

A bench comprising Justices DY Chandrachud, MR Shah and Sanjiv Khanna pronounced the judgement on the loan moratorium and waiver of interest. A bench headed by Justice Ashok Bhushan had earlier reserved its verdict on the batch of pleas on December 17 final 12 months.

The RBI had on March 27, 2020 supplied moratorium on loan instalments accrued throughout March 1 to May 31, 2020 – later prolonged to August 31 – through the nationwide lockdown. The central financial institution had earlier additionally permitted lenders a one-time loan restructuring with out classifying them as non-performing property to curb monetary stress.

The SC in September 2020 had ordered that accounts that had been not NPAs as on August 31 ought to not be categorized as such till additional orders. A month later in October, the Centre introduced waiver of compound interest charged on sure classes of loans of as much as Rs 2 crore.

The Centre had submitted that if it had been to contemplate waiving interest on all of the loans and advances to all classes of debtors for the six-month moratorium interval, then the quantity foregone can be greater than Rs 6 lakh crore. If banks had been to bear the burden, it will wipe out a considerable half of their web price, rendering most of the lenders unviable and elevating a critical query over their survival.