Loan repayment: Govt to take call on moratorium interest soon, markets see hope
The court granted more time to the Centre, the Reserve Bank of India (RBI), and banks to file their replies on an issue that was brought to court as a clutch of petitions seeking waiver of accrual of interest for the loan moratorium period.Updated: Sep 29, 2020, 04:00 IST
The Union government told the Supreme Court on Monday that it is likely to decide within 2-3 days the issue of whether people will need to pay interest for the period during which they used a repayment moratorium for their loans, which was announced as a measure to mitigate financial hardship due to the Covid-19 lockdown.
The court granted more time to the Centre, the Reserve Bank of India (RBI), and banks to file their replies on an issue that was brought to court as a clutch of petitions seeking waiver of accrual of interest for the loan moratorium period. The case was adjourned till October 5 and the Centre said it will file its reply by October 1.
Shares rose on Monday, led by banking stocks on hopes that the government may offer support and infuse some capital into the sector, with gains in global markets also aiding investor sentiment.
The broader NSE Nifty 50 index rose 1.6% to 11,227.55 and the S&P BSE Sensex climbed 1.6% to 37,981.63.
“Expectations of a stimulus package from the (Indian) government are also helping,” said Aamar Deo Singh, head advisory, Angel Broking, according to Reuters.
“Markets have bounced back from important technical levels. 10,800 was an important technical support level and a lot of short covering has also happened,” Singh added.
Solicitor general Tushar Mehta, appearing for the Centre in the court, submitted that the government was at a very advanced stage in its decision-making process on the moratorium period interest issue. He sought some more time to place on record the details of actions to be taken by the government.
Senior advocate Rajiv Dutta, representing the petitioners, opposed the adjournment and said the case must be heard and listed at the earliest. The bench said that it will consider and hear all the submissions on the next date of hearing. The Solicitor General was also directed to serve a copy of his affidavit upon all appearing parties in the matter.
The top court bench, headed by Justice Ashok Bhushan and comprising Justices R Subhash Reddy and MR Shah, on September 3 passed an interim direction holding that the accounts not declared as non-performing asset (NPA) as on August 31 shall not be declared as NPAs till further orders. The interim order had been extended on the last date of hearing.
On September 10, the court granted the Centre, the RBI and banks two weeks to work together and file a concrete reply on their stand on waiving interest charged during the loan moratorium and related issues. The court had ordered the interim extension of the loan moratorium till September 28, directing banks not to tag any loans as non-performing till further orders.
The court had also noted that an expert committee had been constituted to look into all the issues and action will be taken by the government.
Petitioner Gajendra Sharma submitted that the interest would continue to accrue during the moratorium, which ultimately the borrower would have to pay. The petition contended that no interest should be charged during the moratorium because people are facing “extreme hardship”. It also stated that paying additional interest on top of regular EMIs would be difficult. The Centre recently told the court waiver of interest on deferred EMIs during moratorium period would be against “the basic canons of finance” and unfair to those who repaid loans as per schedule.
(With Reuters inputs)