Loan moratorium: don’t report defaulting debtors as NPAs until further notice, says SC
New Delhi, 03 Sep: The Supreme Court said accounts not reported as NPA for lack of loan repayments will not be reported until further notice. The court also took the case under advisement on September 10.
On Wednesday, it was submitted that banks are free to restructure loans but cannot penalize honest borrowers by charging interest on deferred EMI payments as part of the moratorium during the COVID-19 pandemic.
The submission was made by a petitioner opposing the movement.
A bench led by Judge Ashok Bhushan, who began the final hearing on a batch of pleadings raising the issue of interest on deferred payments under the scheme during the moratorium period, was told that paying interest on interest was a double whammy for borrowers.
Senior lawyer Rajiv Dutta, representing petitioner Gajendra Sharma who took out a mortgage from a bank, attacked the accumulation of interest on IMEs even during the moratorium period.
RBI introduced the program and we thought we would pay the IME after the moratorium period and later we were told that compound interest would be charged and it would be a double whammy for us as we will be paying interest on the interests, Dutta said. The bench.
They have given so much relief to the banks and we are not receiving any relief in real terms, he said, adding that there is no default on my part (the petitioner) and we cannot be penalized for using a plan by charging us interest on the interest. .
Dutta claimed that the Reserve Bank of India (RBI) is a regulator, not an agent of the banks, and borrowers are penalized during the COVID-19 period.
Now the government says it will restructure the loans. You are restructuring but not penalizing honest borrowers, he said.
Senior lawyer CA Sundaram, representing the Confederation of Property Developers’ Associations of India (CREDAI), told the judiciary that the moratorium should be extended for at least six months.
If the interest cannot be waived, please reduce it to a level at which banks pay their depositors, he said.
Sundaram referred to the RBI’s Aug. 6 circular that empowered banks to decide on a moratorium on industries.
The Center and the RBI had told the Supreme Court on Tuesday that the moratorium period on loan repayments during the COVID-19 pandemic is extended by two years and that several measures have been taken to help struggling sectors.
Solicitor General Tushar Mehta, appearing for the Center and the RBI, said the economy contracted 23% in the April-June quarter due to the lockdown and coronavirus-related restrictions.
The Center also told the highest court that waiving interest on deferred IMEs during the moratorium period would be against basic canons of finance and unfair to those who repay loans on schedule.
The RBI, however, released a scheme which provides for an extension of the moratorium by two years for certain stressed borrowers, the central government of the Supreme Court had informed.
The Ministry of Finance had filed an affidavit in court that asked the Center and the RBI to review the decision to charge interest on IMEs and interest on interest during the moratorium period introduced under the scheme in due to the COVID-19 pandemic.
Article first published: Thursday September 3rd, 2020, 6:24 PM [IST]