The Supreme Court resumed the hearing in the interest waiver or loan moratorium case. The top court disposed of Gajendra Sharma’s request for interest on the interest waiver. The other candidacies of electricity producers and the various State CREDAIs are heard.
A bench consisting of Judges Ashok Bhushan, R Subhash Reddy and MR Shah hears the case today.
Here are the latest updates:
Supreme Court: Case adjourned until December 2, 2020, banks can follow normal business rules.
Harish Salve for Indian Banks Assoc: People are withdrawing money from missing accounts. SC should consider withdrawing the order prohibiting banks from classifying accounts as NPA. If it’s not the NPA, at least allow the banks to stop overdraft facilities.
Credai Chattisgarh to SC: Request for waiver of interest for the moratorium period. The interest levy is not sustainable, which is inconsistent with the objective of the RBI moratorium.
Individual applicant to SC: People’s credit rating has been affected during the crisis and will affect the outlook for the future. There is a lot of harassment from the banks for the recovery. Further relief is required in the form of a waiver of interest.
Kapil Sibal for Credai Mumbai at SC: See for the moratorium until the end of FY21. Search for additional liquidity, emergency line of credit.
Kapil Sibal for Credai Mumbai at SC: The position of the RBI and the government is that contractual provisions will have to be respected, regardless of a disaster of this magnitude. The position is that contractual provisions will prevail with or without Covid. As of September 1, 98% of the industry will become NPA. These are government figures. If the court does not protect us, we will not be entitled to any redress. If SC does not protect, the builders will not be entitled to any compensation.
Government Solicitor General Tushar Mehta in SC: There is a mechanism in place, issues should be allowed to be resolved according to the mechanism. Depending on the economic state, various factors come into play for the government to decide on the tax issue.
Harish Salve for the Association of Indian Banks at the Supreme Court: SC had adopted skylights prohibiting banks from classifying accounts as NPA. “This restraining order must be overturned. Banks are rendered powerless in the face of defaulting borrowers,” he said.
On November 19, the Supreme Court ordered the Center and the Reserve Bank of India (RBI) to respond to suggestions from the power industry while eliminating claims in which claimants are satisfied with the waiver of compound interest.
The repairs requested by the power gencos during the last hearing –
1. RBI to allow restructuring of funds borrowed from LICs, AIFs, REITs and foreign banks. The RBI currently only allows restructuring by banks, NBFCs and cooperatives.
2. Restructuring should be at the request of borrowers, not at the lender’s discretion.
3. Restructuring requires logistical exercises such as forensic audit. Such requirements should be removed.
4. Lenders should be prevented from taking coercive measures such as invoking bank guarantees.
The bench of three judges composed of judges Ashok Bhushan, R. Subhash Reddy and MR Shah heard a batch of petitions asking for interest relief during the Nov. 19 loan moratorium period.
The Supreme Court ordered power producers and other petitioners to submit suggestions to lawyers at the Reserve Bank of India (RBI). In addition, he called on the Center and the RBI to respond to the suggestions presented in court on November 19.
In a bid to provide relief to borrowers during the COVID-19 pandemic, the RBI announced in March a moratorium on the repayment of term deposits for three months, which was then extended until August 31. The move was to give borrowers more time for clear payments from IMEs amid the economic fallout from the foreclosure, without being classified as NPA.
The RBI had said on June 4 that banks would lose Rs 2million lakh if interest was waived during the moratorium period.
On October 5, the judiciary heard requests for waivers of interest accrued during the six-month loan moratorium period. The Supreme Court gave the Center and the Reserve Bank of India (RBI) time to file additional affidavits.
On October 2, the Center told the Supreme Court it would waive compound interest on loan repayments of up to Rs 2 crore.
On September 3, the Supreme Court ordered banks not to report the accounts as non-performing assets (NPAs) until further notice.
(This is a developing story. Please check for updates.)