The Centre on Friday told the Supreme Court that it was not possible to provide more relief to different sectors affected by the coronavirus crisis, adding that “courts should not interfere in fiscal policy”, reported NDTV. The government made the statement in an affidavit on the loan moratorium case.

“Policy is the domain of the government and court should not go into sector-specific financial relief,” the affidavit stated. “Any further relief, besides waiving of compound interest for loans up to Rs 2 crore, is detrimental to the national economy and banking sector.”

In a separate affidavit, the Reserve Bank of India said that it was not possible to extend the moratorium beyond six months, according to the Hindustan Times. The RBI said a long moratorium beyond six months “may result in vitiating the overall credit discipline which will have a debilitating impact on the process of credit creation in the economy”. It added: “Longer moratorium can raise risk of delinquencies after scheduled payments resume.”

The Centre’s response came after the Supreme Court said on Monday that the government’s affidavit on waiving “interest on interest” on loans up to Rs 2 crore was not satisfactory and must be submitted again. It had asked to consider the concerns of the real estate and electricity producers in the fresh affidavits and said the Centre did not deal with several matters raised by the petitioners.

Last week, the Centre had agreed in the Supreme Court to waive compound interest charged on loans of up to Rs 2 crore for a six-month moratorium period.

In its fresh petition, the government said that relief for specific sectors cannot be demanded by petitioners. “[The] only solution is lending institutions and their borrowers formulate restructuring plans... and [the] Centre, and RBI cannot interfere,” the affidavit stated, adding that it was not possible to arrive at one particular formula as per Kamath Committee report for providing sector-specific relief.

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.

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.