UPDATES: SC adjourned the loan moratorium case hearing!
By Priti Kumari
NEW DELHI: The Apex Court defers the much-awaited hearing on loan moratorium to October 13, asking the Centre and the RBI to file additional affidavits. The SC is mandated to adjudicate, over the petition demanding an extension in the moratorium period on repayment of loans and waving off the compound interest (interest on the interest ) on the loan amount.
The SC observed, "No consequential circular has been issued by the RBI or any other authority".The bench of SC hearing the petition on the same asked the Solicitor General Tushar Mehta (appearing in the court from the government side) to submit the recommendations of the Kamath Committee on debt restructuring in 26 sectors affected by COVID-19.
The global pandemic constrained the government to provide a moratorium on the EMIs of the loans. Prior, the government bestowed moratorium period of 3 months i.e from March 1, 2020, to May 31, 2020, but due to relentless surge in the COVID-19 cases which led to the cessation of economic activities, the government had to increase the moratorium period up to August 31, 2020. Indeed, moratorium restricts the banks to declare any non-paying account of loans as NPA(Non-Performing Asset) or defaulter.
As per the sources, the government and the Central Bank are of the view that the overshooting of interest on deferred EMIs would be against the fundamental principles of finance and also will be unjust for those paying the loans, timely. Subsequently, the government decided to charge "interest on interest" on loans. But, a lot of pleas lodged in the SC challenging this government's stance consequence to which the government stated on October 3, that it will waive "(Compound Interest)Interest on Interest " on loans up to INR 2 crore from May 1 to August 31, of 2020. Against this, Kapil Sibal, C. A Sundaram and Rakesh Dwivedi acclaimed this payment of 'Interest on Interest ' doesn't provide any relief for the industrial people.
However, the SC somewhere seems to agree on the government's opinion that the 'EMI payment for the moratorium period can't be waived off 'while on the other hand, SC believes," interest charged on these payments are like penalizing the customers." Therefore, the Apex Court asked the government and the RBI "to come up with something concrete" which can be heard on October 13.