Supreme Court extends Loan Moratorium till 28 September

# On Thursday, the Supreme Court ordered an interim extension of the loan moratorium till 28 September, directing banks not to tag any loans as non-performing till further directions.

New Delhi: The Supreme Court on Thursday virtually extended the loan repayment moratorium till September 28 and directed banks not to declare any loan as NPA (non-performing asset) due to non-payment of installments during the period.

Following the nation-wide lockdown which was imposed in March to curb the spread of the Coronavirus pandemic, the Reserve Bank of India had given the facility of deferred payment of installments to borrowers and the scheme had ended on 31 August.

A bench of Justices Ashok Bhushan, Sanjay Kishan Kaul and M R Shah had said that these are challenging times and it is a serious issue as on one hand moratorium is granted and on the other hand, interest is charged on loans.

The apex court adjourned the case for the last time, granting the Centre, Reserve Bank of India (RBI) and banks two weeks to work together and file a concrete reply on their stand on waiving of interest charged during the moratorium period.

Earlier, the apex court urged the Centre and the Reserve Bank of India (RBI) to review the move to charge interest on EMIs during the moratorium period introduced under the scheme due to the Covid-19 pandemic, PTI reported.

The bench clarified that it was giving one last opportunity and thereafter the matter will not be adjourned.

Solicitor General Tushar Mehta, appearing for the Centre said that the government at the highest level is considering all issues rose in the batch of petitions and within two weeks, the appropriate decisions will be taken with regard to the problems faced by different sectors during the pandemic, it reported.

He said that everything has to be considered holistically and the government is considering all the sectors for which an expert panel has been constituted.

Mehta was advised by the bench that specific decisions should be made with consistency in order not to delay the matter again.

Mehta said that two to three rounds of the meeting took place with regard to the concerns raised by the petitioners at the last hearing, and questions are being examined.

He tried to postpone the hearing by two weeks saying that considered decisions must be taken in consultation with all stakeholders including banks playing a vital role in the issues at hand.

Senior advocate Harish Salve, appearing for the association of banks, has said that requirements and guidelines must be provided for individual borrowers.

The bench asked who will formulate these norms to which Salve replied that the Ministry of Finance will do as it has been done at the level of RBI.

Mehta said that it is being done at a level higher than the RBI and whatever will be there it would be comprehensive.

Salve pointed out that for the power sector, the states will have to be taken on board as entire loans cannot be put on banks.

Senior advocate Kapil Sibal, appearing for CREDAI said that the current restructuring of loans won’t provide relief to 95 per cent of borrowers and pointed that the downgrading of borrowers is continuing which must be protected.

He sought extension of the loan moratorium, stay on downgrading and interest of levy.

Senior advocate Rajeev Dutta, appearing for borrowers said that banks are charging compound interest while now the loans are being restructured which should be done earlier.

Contending that the government should make its stand clear on the charging of interest on interest by banks, he said that lakhs of people are in hospitals and many have lost their sources of income.

Senior advocate V Giri, appearing for RBI said that downgrading is being done on an individual basis and as per existing norms. He sought deferment of hearing by two weeks saying all issues are under active consideration at the highest level.

Salve told the court that now the matter has become adversarial and urged the court to implead banks association in all the petitions on the issue.

The bench said that it was not the question of adversarial as with respect to interest it is yet to make a decision but with regard to charging of interest on interest by banks the court is inclined to pass orders.

Salve pointed out that the entire banking structure works on compound interest and that is what is being currently done.

The bench then told Mehta that it was adjourning the matter but everything including the issues raised in the hearing should be considered.

On September 3, in relief to stressed borrowers who are facing hardship due to the impact of COVID-19 pandemic, the court had said that accounts which were not declared as non-performing assets till August 31 this year, shall not be declared NPA till further orders.

The pleas filed in the apex court have raised issues pertaining to the validity of March 27 circular of the RBI which allowed lending institutions to grant a moratorium on payment of installments of term loans falling due between March 1, 2020, and May 31 this year due to the pandemic. Later, the period of the moratorium was extended till August 31.

The Centre had recently told the apex court that waiver of interest on deferred EMIs during the moratorium period would be against the basic canons of finance and unfair to those who repaid loans as per schedule.

RBI has however come out with a scheme which provides for the extension of the moratorium for two years to certain stressed borrowers, the Centre had informed the top court.

Borrowers and various bodies representing different sectors had earlier assailed before the apex court the charging of “penal’ interest on deferred EMI payments by banks under the moratorium scheme during the pandemic.


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