Anushka Mansharamani
The Supreme Court heard several petitions on 8th December regarding the interest waiver loan during the moratorium period.
The bench that heard the petitions comprised Justices Ashok Bhushan, MR Shah, and R Subhash Reddy.
Solicitor General, Tushar Mehta firstly stated that the circulars were issued by the Reserve Bank of India due to the direction of the Court and that the grant of the waiver could lead to a loss of Rs. 6 lakh crore due to the amount of relief granted.
According to the SG, the National Disaster Management Authority (NDMA) should be recognised as it has given a great amount of relief to the huge population of India.
He further elaborated that the decisions taken under the Disaster Management Act are taken by the PMO and the PMO is the chairman of the NDMA.
He stated that the waiver of interest is not the solution for the economy and mentions the Credit Guarantee Schemes that have already been put in place for the MSME.
The Supreme Court of India on this stated that the NDMA has not done enough as more submissions need to be made concerning the industries.
Senior Advocate V. V. Giri, representing the RBI, stated that they have reports proving that approximately 70 percent of the people have not availed of the moratorium.
It was further observed by the Supreme Court of India that losses granting the wavier can be over 6 lakh crore, and the Indian economy would not be able to withstand this amount.
According to Solicitor General, Tushar Mehta, case by case restructuring of loan accounts is not possible for the RBI or the Finance Ministry. He also mentioned that most of the petitions state the issues that they have faced before COVID-19 too.
He also stated that the banks are facing the stress of the Non- Performing Assets (NPAs) already. If the interest is waived off, the cost associated with it will have to be taken either by the bank or the government. In this case, none of the two is possible.
Therefore Tushar Mehta concluded that more measures cannot be taken to waiver the interest off, and there is a lot that is already been done to give relief to the industrial, individuals, and the MSMEs.
The Supreme Court of India observed that the restructuring circular is not enough, and there needed to be more measures taken.
Advocate V. V. Giri stated that any moratorium money can be paid if the measures and frameworks are in place.
The hearing ended on the note that the bench wanted the approved policies by the bank to be put on record to which Giri stated that the approval of the board is remaining, and the discretion of every resolution plan has to be with the bank and not with the borrower.
Giri lastly stated that “RBI as a regulatory body needs to enforce discipline so that banks maintain the same while lending.”
In March, the Reserve Bank of India had announced a moratorium on repayment of term deposits for 3 months, which was further extended till 31st August in the eye of the COVID-19 pandemic.
On 3rd September, the Supreme Court of India directed the banks to not declare the accounts until further notice.
The Central government in October stated that it would waive the compound interest on the repayment of loans to provide some sought relief to the MSME and individuals. The repayment of the loan was up to the Rs. 2 crore categories only.
After the announcement of the compound interest waiver, the Supreme Court of India disposed off all the petitions that were satisfied by this announcement.
The Supreme Court of India on 19th November directed the Reserve Bank of India and the central government to reply to the suggestions given by the bench.
The arguments of the hearing are further scheduled to be heard on 9th December 2020 (tomorrow).