The Supreme Court on Wednesday refused to allow the Centre a month’s time to implement the interest waiver on loans of up to Rs 2 crore, NDTV reported. It asked why it should take such a long time to implement a decision already taken, and directed that the execution of waiver should be done by November 2. The government claimed that the deadline for providing relief to borrowers was November 15.
“The common man’s Diwali is now in government’s hands,” said Justice MR Shah, part of the bench. “The common people are worried. We are concerned with people with loan up to Rs 2 crore.” The Centre had on October 3 agreed to waive compound interest charged on loans of up to Rs 2 crore for a six-month moratorium period.
The top court on Wednesday continued hearing a batch of petitions seeking extension of the loan moratorium period beyond six months or waiver of interest.
“Our view is one month is not required to implement the decision,” the three-judge bench said. “The delay is not in the interests of common man…it is a welcome decision to give relief for small people. But some concrete results are needed.”
The Centre had submitted an affidavit to the court on October 9, in which it said that it was not possible to provide more relief to different sectors affected by the coronavirus crisis. The Centre added that “courts should not interfere in fiscal policy”.
The Centre’s response came after the Supreme Court noted last week 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 the Centre to consider the concerns of the real estate sector and electricity producers in the fresh affidavits.
The Reserve Bank of India had also told the Supreme Court that it was not possible to extend the moratorium beyond six months. The RBI said the extension “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.”
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.
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.
Considering the economic impact of the lockdown imposed to fight the coronavirus crisis, the RBI 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.