NEW DELHI: The Supreme Court deferred its hearing on a batch of pleas seeking a waiver of accruing interest and an extension of the loan moratorium to November 18, during which time the apex court has asked all parties to file written submissions.
The Reserve Bank of India’s (RBI), for its part, requested the top court to lift the over two-month-long interim stay on the classification of non-performing assets (NPAs) by banks which, it said, was creating difficulties for the central bank.
The pleas pertain to the charging of interest-on-interest by banks on EMIs of borrowers who availed the loan moratorium extended as a measure of relief during the pandemic. The court also saw representations from power producers and MSMEs, who also sought an early hearing and financial aid to tide over the pandemic. However, the SC asked them to argue their cases during the next hearing.
While the moratorium period had ended on August 31, the SC had restrained banks from classifying any more accounts as NPAs till further orders. Petitioners have also argued that loan defaults would shoot up exponentially if the moratorium period was not extended till the pandemic retreats.
The RBI had opposed the petitions seeking an extension of the loan moratorium period, stating that a longer moratorium will lead to a rise in defaults once scheduled payments resume. “It may result in vitiating the overall credit discipline which will have a debilitating impact on the process of credit creation in the economy.
It will be the small borrowers which may end up bearing the brunt of the impact as their access to formal lending channels is critically dependent on the credit culture,” it had said. The Centre too opposed any interest waiver or further relief for big borrowers, stating that the M V Kamath Committee recommendations are already examining loan restructuring for big borrowers and addressing sectoral issues. The Finance Ministry had also filed an affidavit declaring that lenders would credit eligible borrowers the difference between compound and simple interest collected on loans of up to Rs 2 crore during the period.
Rs 2 crore interest waiver threshold
Interest-on-interest to be credited to borrowers
The RBI had filed an affidavit saying that it has asked all banks, and other financial institutions to take “necessary actions” to credit borrowers the difference between compound and simple interest collected during the moratorium
SC urges Centre to implement scheme fast
On October 14, the apex court had observed that the Centre should implement “as soon as possible” the interest waiver on loans of up to `2 crore under the scheme and had said that the common man’s Diwali is in its hands