Loan Moratorium: Supreme Court Grants Government, RBI Two More Weeks
The Supreme Court of India, on Sept. 10, sought views from the Reserve Bank of India and the central government on the issue of “charging compound interest and credit rating/downgrading’’ during the six-month moratorium announced in the wake of the Covid-19 outbreak.
“On the next date of hearing, the specific instructions with regard to charging of compound interest and credit rating/downgrading during moratorium period shall be obtained, so that appropriate order be issued on the next date of hearing,” the top court’s order said. The court will next hear the case on Sept. 28.
The court has been hearing a batch of petitions seeking relief from interest levy on loan payments deferred during the moratorium period, which was initially for a period of three months till May 31, was later extended till Aug. 31. The moratorium terms set by the Reserve Bank of India require the borrower to pay deferred interest...or what the petitioners in this case are referring to as interest on interest for the period of the standstill. In previous hearings too the government had sought time to respond.
During Thursday’s hearing, a petitioner expressed concern over individual or personal loans, which according to them, were more adversely affected during the pandemic.
“Learned counsel for the petitioners have expressed their concern with regard to individual loans, apart from other sectors. It’s submitted that individuals are more adversely affected during this period of pandemic,” the court’s order, which recorded submissions of the petitioners, said. “Learned counsel for the petitioners have also submitted that banks are debiting interest as well as interest on interest from the accounts of the creditors. It’s further submitted that credit rating is also being downgraded which may have an adverse effect, with regard to various account holders.”
Senior Advocate Harish Salve, who appeared for the Indian Bank Association, requested the court to grant time to banks and the RBI to consider the issue raised today and requested that no interim order should be passed without considering their stance.
Solicitor General of India Tushar Mehta informed the court that the central government is still considering the issues raised in the case and consultations are also being made with the RBI. A decision will be taken within two weeks, Mehta told court. The response will also include the manner and mechanism of extending benefit to different sectors, Mehta said.
V Giri, the counsel for RBI, has also committed to file an affidavit in two weeks on this issue.
During the last hearing, the apex court had granted interim relief saying accounts that weren’t non-performing assets as on Aug. 31 won’t be declared such until further orders. The interim order will continue to be in effect until further directions from the court.