New Delhi: In a legal statement to borrowers, the Supreme Court on Tuesday ordered that no compound or fine interest be levied during the six-month loan period announced last year amid the Covid-19 pandemic and the amount already charged is refunded, credited or adjusted. The court refused to intervene in the decision of the center and the Reserve Bank of India (RBI) to extend the loan moratorium no longer than 31 August last year, saying it was a policy decision.
A bank headed by Judge Ashok Bhushan said the Supreme Court could not conduct a judicial review of the center’s financial policy decision unless it was bad and arbitrary. The court said it could not interfere with the government’s decision to set relief priorities during the nationwide pandemic and that the government was under financial constraints.
The bank said this in its ruling on a number of pleas filed by various trade associations, including from real estate and power sectors, with a view to extending the moratorium on loans and other relief due to the pandemic. The RBI issued the circular on March 27 last year in which credit institutions can issue a moratorium on the payment of installments on term loans owed between March 1, 2020 and May 31, 2020 due to the pandemic.
Later, the moratorium was extended to 31 August last year. In the ruling, the Supreme Court said that from various steps taken by the government, it can not be said that the center and the RBI did not consider the relief for the borrowers. The bank said it could not crack down on a policy decision simply at the request of submitters because the other view is possible and that the other decision could be more beneficial.
The bank has refused to comment on the financial policy decision taken by the government, but it is not open to the court to conduct a judicial review of the policy decision merely at the request of petitioners. It is said that a complete waiver of interest is not possible as it will have major financial consequences. The apex court reserved its ruling on December 17 last year.
The center had earlier argued before the Supreme Court that if it were to consider waiving interest on all loans and advances to all categories of borrowers for the six-month moratorium period announced by RBI, the advance amount would be more than Rs 6 lakh crore . If the banks bore this burden, it would inevitably wipe out a substantial and a large part of their net worth, which would make most credit providers incompetent and raise a very serious question mark over their survival, he said.
The government has said that this is one of the main reasons why interest rate waiver is not even considered and only the payment of installments is delayed. The illustration said that the six-month interest waiver, in the case of only the State Bank of India, eliminates half of the net worth of the bank that had accumulated in nearly 65 years of its existence. would be spacious. It pointed to the sector-specific assistance measures taken by the government for small and medium-sized enterprises / MSMEs, including sectors such as restaurants and hotels.
The center has announced an emergency credit-linked guarantee scheme (ECLGS) of Rs 3 lakh crore that offers extra credit at lower interest rates, with 100 per cent government guarantee and no new collateral, he said. The scheme has been expanded to 27 with higher financial limits Covid-19 affecting sectors, including restaurants and hotels, said.
On November 27 last year, the Supreme Court asked the Center to ensure that all steps are taken to implement its decision to pay interest on eight specific categories of loans, up to $ 2 million, in light of the pandemic . The eight categories of loans are MSME (micro, small and medium enterprises), education, housing, sustainable consumer, credit card, car, personal and consumption.
Source: Telangana Today