The Supreme Court on Monday ordered the Centre and the Reserve Bank of India to place on record the KV Kamath Committee recommendations on debt restructuring, necessitated due to the economic stress caused by the coronavirus pandemic, PTI reported. The court also said the Centre’s affidavit on waiving “interest on interest” on loans up to Rs 2 crore was not satisfactory and must be submitted again.
The Centre was asked to consider the concerns of the real estate and electricity producers in the fresh affidavits it files. The Supreme Court also noted that “no consequential orders or circulars” were issued by the government or RBI on enforcing the Centre’s orders, NDTV reported.
A bench comprising Justices Ashok Bhushan, R Subhash Reddy and MR Shah was hearing a batch of pleas alleging that banks have decided to charge interest on the EMIs which have not been paid by the borrowers between March 1 and August 31, through the RBI’s loan moratorium scheme. The plea stood against charging “interest on interest”. The Supreme Court heard the matter through videoconferencing.
On Saturday, the Centre had agreed in the Supreme Court to waive compound interest charged on loans of up to Rs 2 crores for a six-month moratorium period. The Centre said it will seek approval from Parliament on providing appropriate grants in this regard.
The Kamath panel had made recommendations for 26 sectors that lending institutions could consider while finalising loan resolution plans. It had said that banks could adopt a graded approach based on the severity of the impact of the coronavirus pandemic on each sector. The top court on Monday asked the Centre and RBI to place before it within a week the recommendations and the decisions and other notifications on loan moratorium.
The Supreme Court has allowed the Indian Banks Association, Confederation of Real Estate Developers Association and other parties to file their responses to the Centre’s affidavit.
On September 10, the court had given the Centre two more weeks’ time to come up with a concrete plan for all sectors in the loan moratorium scheme. The Centre had told the court that an expert committee at the highest level has been constituted to take a decision on moratorium extension, accruing interest during the moratorium, and other related matters.
On September 3, the Supreme Court had ordered that accounts that have not been declared non-performing assets as on August 31 should not be declared so until it finishes hearing the pleas.
Considering the economic impact of the lockdown imposed to fight the coronavirus crisis, the Reserve Bank of India had on March 27 said that banks would be allowed to grant a moratorium of three months on payment of all installments due between March 1 and May 31. On May 23, it said that banks can extend the moratorium until August 31. However, the RBI had said it would be imprudent to go for a forced waiver of interest, risking the financial viability of the banks it was mandated to regulate and putting the interests of the depositors in jeopardy.
In August, the Centre said the loan moratorium scheme can be extended by a period of two years after the top court had criticised the Centre for “hiding behind the RBI” without making its stand clear on the loan moratorium.
Limited-time offer: Big stories, small price. Keep independent media alive. Become a Scroll member today!
Our journalism is for everyone. But you can get special privileges by buying an annual Scroll Membership. Sign up today!