More time for loan moratorium not possible, court should not interfere : Centre to SC

More time for loan moratorium not possible, court should not interfere : Centre to SC

The RBI has filed an affidavit before Supreme Court in the loan moratorium case hearing and said that it’s not possible to give more time as a relief for sectors hit by the coronavirus pandemic.

In its fresh affidavit, the Reserve Bank of India (RBI) has told Supreme Court, “Resolution Framework issued by the Reserve Bank on August 6, 2020, is aimed at facilitating the revival of real sector activities and mitigating the impact on the ultimate borrowers, which are under financial stress caused by economic fallout on account of Covid-19 pandemic. In terms of the Resolution Framework, only those borrower accounts shall be eligible for a resolution which were classified as standard, but not in default for more than 30 days with any lending institution as on March 1, 2020.”

In its earlier affidavit in the loan moratorium case hearing, the Centre had said that policy decisions were the domain of the executive government and court should not go into the issue of sector-specific reliefs.

The Union government also said that sufficient leeway has already been provided to accommodate the impact of Covid-19 on sectors while stipulating specific ratios.

In the new affidavit, the Centre and RBI have argued that the expert committee recommendations have already looked into sector-specific conditions for loan repayment and the discretion has been given to banks and financial institutions to restructure loans as needed.

Finance Ministry filed an additional affidavit on October 2 saying that it has decided to waive compound interest (interest on interest) charged on loans of up to Rs 2 crores for a six-month moratorium period announced due to the pandemic from individual borrowers as well as medium and small industries.

On Monday, Supreme Court said the Centre's response did not contain "necessary details" and asked it and the RBI to place on record the K V Kamath committee recommendations on debt restructuring in view of Covid-19 related stress on various sectors as well as the notifications and circulars issued so far on loan moratorium.

The Kamath panel had made recommendations for 26 sectors that could be factored by lending institutions while finalizing loan resolution plans and had said that banks could adopt a graded approach based on the severity of the coronavirus pandemic on a sector.