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Supreme Court to pronounce order on loan moratorium extension today
The Centre had agreed to waive compound interest on loans for six categories of borrowers who secured loans of up to ₹2 crore. Various business associations and corporate bodies have demanded an extension of this benefit
The Supreme Court on Tuesday will pronounce its order on the extension of moratorium offered by Reserve Bank of India (RBI) on loan instalments accrued during March to August 2020 when a nationwide lockdown was imposed to curb the outbreak of the Covid-19 pandemic.
A bench of justices Ashok Bhushan, RS Reddy and MR Shah will pronounce its decision on a clutch of petitions filed by corporate bodies, business associations and individuals demanding an extension of the moratorium beyond August 2020. At the instance of the court, the Centre had agreed to waive compound interest on loans for six categories of borrowers who secured loans of up to ₹2 crore. The various business associations and corporate bodies have demanded an extension of this benefit to borrowers who obtained loans of amounts beyond ₹2 crore.
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The Centre and RBI have opposed these requests. Solicitor General Tushar Mehta, representing the Centre, and senior advocate V Giri representing RBI, said that compound interest on loans of up to ₹2 crore was waived keeping in mind fiscal constraints and viability of banks. Any order to further extend the benefit to other borrowers will make banks unviable, which no economy like India will be able to sustain, the Centre and RBI had argued.
Big borrowers like power producers, real estate developers, textile mill owners, knitwear association, jewellery manufacturing association, contract carriage operators, hotel and restaurant associations of states, financial technical institutions, and shopping centre associations are all represented before the Supreme Court. These petitioners had either obtained big loans (of over ₹1,500 crore) and not-so-big loans (of up to ₹1,500 crore) and expected some relief from the court as businesses were severely hit during the lockdown. Some petitioners even questioned the ceiling limit of ₹2 crore for waiving of compound interest.
The RBI and Centre have maintained that problems of big borrowers were remedied by the KV Kamath Committee which fixed parameters for sector-specific resolution for industries and businesses under stress due to the pandemic.
The RBI had filed an affidavit in Supreme Court last October stating that the moratorium on loan repayment cannot be extended beyond six months and requested the court to lift the stay on classifying defaulting accounts as non-performing assets (NPA) passed by the top court on September 3, 2020. The court had held, “The accounts which were not declared NPA till August 31, 2020 shall not be declared NPA till further orders.”
