Loan relief extendable by 2 yrs: Govt
NEW DELHI: The Indian economy is “stressed”, and issues relating to a waiver of interest on loans under moratorium and interest on such loans interest, require detailed consideration by the centre, Reserve Bank of India (RBI) and Bankers Association in view of the fact that several sectors are affected, the union government told the Supreme Court on Tuesday.
Solicitor general Tushar Mehta, the central government’s second senior-most law officer, told the court that the Centre, RBI and the Bankers Association should be allowed to “put their heads together” and come up with solutions for the issue.
“There are issues. The economy is stressed. This requires some discussion. What I am suggesting is to allow the Centre,
RBI and Bankers Association to put our heads together. We will have to identify the class of borrowers, sectors, etc which will take a hit,” Mehta said.
The court was hearing a plea for waiver on interest charged by banks, citing the relief earlier announced by RBI on the payment of equated monthly instalments (EMIs) between March and August 31 due to Covid-19 pandemic. The plea by Agra resident Gajendra Sharma specifically cited RBI’s March 27 notification announcing a moratorium on loan repayments while permitting banks to levy interest on the same. The moratorium granted by RBI expired on August 31 but Mehta told the top court on Tuesday that the same is extendable by up to 2 years as per RBI circular of August 6.
“The framework under RBI’s circulars dated August 6 also permits lenders to allow moratorium of up to two years, irrespective of current six month moratorium ending on August 31. This extended moratorium becomes part of an individualised solution for a borrower and is made available along with other interventions. Thus, a borrower, who is fearful of being in default as on September 1 and becoming an NPA (non performing asset) soon thereafter, could continue to avail moratorium as a part of the resolution plan implemented in terms of the August 6 circular,” the Centre said in an affidavit on Monday.
The Centre also said waiver of interest on interest during a moratorium would be against the basic canons of finance and urged the court to leave the issue relating to debt restructuring to RBI stating that the banking regulator’s circular of August 6 addresses concerns expressed by the petitioner. “RBI circulars dated 6.8.2020 take care of all categories of lending institutions and all categories of borrowings as aforesaid, while leaving the nature and the kind of the relief to be given to the lending institution since each category of lending institution would have its own bank/institution- specific financial scenario in terms of the nature of advance, the nature of borrowers, rate of interest,” the Centre submitted.
On August 26, the court took exception to the central government’s reluctance to clarify its stand after it told the SC that it would go by whatever RBI decides. A three-judge bench headed by justice Ashok Bhushan said that the economic plight of people who have availed loans is an outcome of the Covid-19 induced lockdown imposed by Centre and it has to come clear on the issue instead of passing the buck to RBI.