Loan moratorium: The Supreme Court on Wednesday asked the central government to implement its decision to waive “interest on interest” at the earliest while hearing a batch of petitions seeking interest waiver during the loan moratorium. On 3 October, the central government said that it will ‘interest on interest’ on loans of up to ₹2 crores for six months through to the end of August. The government’s decision would come into effect before 15 November, Solicitor General Tushar Mehta told the apex court.
“Common people are worried… We are concerned about people with loans up to Rs 2 crore,” the bench said, as the government sought time to complete certain formalities to implement the relief on loans to help the borrowers tide over the coronavirus crisis. The government’s counsel told the court that the center is “taking a huge burden” to waive interest on loans up to Rs 2 crore “but we are not mentioning the figure”.
“Banks will waive interest on interest and then will be compensated by govt and the calculation will have different modalities. We will have to ensure that the bank gives us a proper format,” Mehta added.
The three-judge bench comprising of Justices Ashok Bhushan, R Subhash Reddy & MR Shah on Wednesday said that the government must not delay the implementation any further. “Why one-month time to implement such a small decision…Benefits of government’s concessions to borrowers up to ₹2 crores must be implemented as soon as possible,” the bench said.
“November 15 is the outer limit for implementation but the government will try to implement it even earlier than that,” Mehta added.
The top court observed, “When the govt has taken a decision to waive interest, why is it taking so much time to implement. Govt is seeking time till Nov 15, why will it take an entire month to effect a simple waiver scheme. If the govt has already decided to exempt small borrowers from interest on interest, it should not be debited from accounts.”
The bench further noted, “Not in the interest of the common people, when a decision has already been taken by the govt. Govt’s decision is welcome, but we need to see concrete results on the ground. Govt has not issued any order to any banks, RBI has not issued any circular. Govt has merely stated on affidavit, has not implemented.”
“Banks will waive interest on interest & then will be compensated by Govt and the calculation will have different modalities. We will have to ensure that the bank gives us a proper format,” said Solicitor General Tushar Mehta.
To recall, the government on Saturday said that it will waive ‘interest on interest’ on loans of up to Rs 2 crore for six months through to the end of August. The RBI had in March announced a moratorium on repayment of term deposits for three months, which was later extended for three more months till August 31.
The move was intended to provide some relief to borrowers during the COVID-19 pandemic and expected to give them more time to clear payments of EMIs amid liquidity crisis due to lockdown, without being classified as non-performing assets (NPAs). The top court on September 3 passed an interim direction holding that the accounts not declared NPA as of 31 August shall not be declared as NPAs till further orders.
On October 10, the RBI has filed an affidavit in the SC on the Moratorium Case urging the court to not undermine its regulatory mandate and lift the stay on the classification of NPS opposing any extension of loan moratorium. RBI further stated that extending it any further would impact the credit discipline.
The RBI maintained that further relief other than categories pointed out by the Finance Ministry will not be possible and that moratorium was only temporary relief. The RBI has taken the same stand as the Centre pointing out how it is not possible to extend the moratorium.
Supreme Court yesterday (October 13) adjourned its hearing on a batch of petitions seeking interest waiver during the loan moratorium period to today. The three-judge bench comprising of Justices Ashok Bhushan, R Subhash Reddy & MR Shah assembled at 12 noon on Tuesday and announced that the matter will be taken up at the end of the board (i.e. after all other cases in the list have been heard).
However, one of the judges constituting the bench was required to sit in a different combination of Judges in the post-lunch session yesterday, so the case was adjourned. The Bench assembled for its hearings today.