SC On Loan Moratorium Highlights: Hearing of petitions seeking interest waiver to resume on Dec 9

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The Supreme Court (SC) on December 8 heard a batch of petitions seeking interest waiver during the loan moratorium period.

A bench comprising of Justices Ashok Bhushan, R Subhash Reddy and MR Shah will resume hearing the petitions on December 9.

Solicitor General Tushar Mehta told the top court that a complete waiver of interest during the six-month loan moratorium period has a cost associated with it.

"If we waive off the interest, there is a cost associated with it. Either the banks take it or the government. The government cannot and depositors cannot," the Solicitor General said.

SC observations: 

> Nobody is saying nothing has been done. It's not case that nothing has been done. Submission is something more is needed to be done with phase industries are going through.

> Circulars have been issued by RBI. But there are certain conditions by which the benefit given by RBI is taken away and majority is derived the benefit for the same.

> Even though restructuring circular came out in August this year, sufferings continue. That's why more measures are required. March 31 will mean a lot of persons will be excluded.

Solicitor General Tushar Mehta to SC: 

> Look at the magnitude of the relief granted and the impact if its granted. If waiver is granted, a loss of 6 lakh crore will be there. Thus waiver was not contemplated but only payment of installments was deferred. (Inputs from Bar & Bench)

> At this juncture for Indian banking system, for one loanee there are eight depositors.

> No one even acknowledged the fact that majority of expense goes in public health and expenditure. Such reliefs are often looked at from each ministry. Centre has taken whatever steps had to be taken.

> NDMA (National Disaster Management Authority) has expressed the aspect whether the finance ministry can take a call on this or not and they have agreed that ministry can take a call.

> Middle and lower middle class wanted waiver of interests and other is big corporate giants who have legacy issues. They had issues prior to COVID and covid might have just aggravated their issues. (Inputs from Bar & Bench)

> "Kamath Committee had consultants with CREDAI, whatever Mr Sibal showed here was shown to Kamath Committee too. Emergency credit link scheme of Rs 3 lakh crore was rolled out".

> 2 percent interest subvention scheme announced, Rs 20,000 crore credit granted. Interest waiver was never a solution. Old defaulters have nothing to do with COVID.

> It is unthinkable to waive interest worth Rs 6 lakh crore. Moratorium misconstrued by many; it's deferment, not waiver. Around half of borrowers knew this, and didn't avail moratorium.

> Case by case restructuring of loan accounts and customising the relief given is not possible for either the finance ministry or the RBI.

> If as an industry you have defaulted earlier than COVID benefit cannot be entertained if they are a defaulter as on February 1.

> Most petitioner associations' legacy issues are due to pre-COVID factors. Whatever could be done for the power sector, has been done. (Input from CNBC-TV18)

> "Borrowers have to pay compound interest because its a chain. Some took moratorium but we had to pay interest to the borrowers all through from own funds and could not leave them high and dry because we were giving benefit to the moratorium takers." (Inputs from Bar & Bench)

> Mitigation is pre disaster preparedness. I am not saying this but this is a liberal interpretation of the provision. From the government, the interpretation cannot be restrictive.

> Under the powers of NDMA, there is separate power of state level disaster management authorities...now the power for loan etc is not under state but is for the Centre

> Banks are already feeling the stress of NPAs (non-performing assets).

Senior Advocate V Giri, appearing for RBI, to SC: 

> RBI as a regulatory body needs to enforce discipline so that banks maintain the same while lending.

Senior Advocate Abhishek Manu Singhvi to SC: 

> Power sector should not be declared an NPA with respect to the loan moratorium issue. (Inputs from Bar & Bench)

Here's what happened previously:

> The Reserve Bank of India (RBI) had in March announced a moratorium on repayment of term deposits for three months, which was later extended till August 31. The move was intended to provide borrowers relief during the COVID-19 pandemic.

> The SC had on September 3 instructed banks not to declare accounts as non-performing assets (NPAs) until further orders.

> The Centre in October said that it would waive compound interest on the repayment of loans of up to Rs 2 crore in some categories, a move that would provide relief to individual and MSME borrowers.

> The top court had on November 19 directed Centre and RBI to reply to suggestions put forth before the bench. The SC also disposed off petitions in which the petitioners are satisfied with compound interest waiver.

> The SC has previously said there is "no merit in charging interest on interest".

> The RBI had on June 4 said lenders will lose Rs 2 lakh crore if interest is waived completely during the moratorium period.