New Delhi: Economic activity came to a standstill in the Corona crisis and the lockdown caused by it. The borrowers were finding it difficult to repay their EMI. Keeping this problem in mind, during the hearing on the Loan Moratorium case, the Supreme Court said that the bank accounts cannot be declared Non Performing Assets (NPA) for the next two months. The bench of three judges said after hearing the case that customers whose bank accounts have not been NPA till August 31, should be given protection till the matter is settled. A three-member bench comprising judges Ashok Bhushan, R Subhash Reddy and MR Shah said that the next hearing of the case would be held on 10 September.
What did the Solicitor General and Judge say in the Supreme Court?
Soliciting on behalf of the government and the RBI, Solicitor General Tushar Mehta said in the Supreme Court that we cannot waive interest but will reduce the pressure of payment. Mehta said that the banking sector is the backbone of the economy and no decision can be taken to weaken the economy.
The Solicitor General said that they believe that all the people who have a problem are right. It is important to consider the situation of every sector, but the banking sector also has to be taken care of. Tushar Mehta said that the purpose of the Moratorium was not that the interest would be forgiven. The situation in Corona has had an impact on every sector but there are some sectors which have performed well. Pharmaceutical and IT sectors are the sectors which have performed well. He said that when the Moratorium was brought, the motive was that the traders could use the available capital and they would not have to bear the burden of the bank’s installment.
Arguing in the Supreme Court, Tushar Mehta said that in the RBI circular dated August 6, banks have been given exemption in deciding the loan recovery process. For this, a committee has also been formed which will submit its report by 6 September. He said that usually the account becomes NPA if the loan installment is not paid for 90 days. Hence the moratorium period was excluded. The first three months and then after three months will expand. Bank accounts will not be NPA on 1 September.
During the hearing, Judge Ashok Bhushan said that this circular is not being challenged but relief is being sought. Judge Bhushan asked whether those who have already been defaulter and their economic condition has deteriorated due to Corona will not get benefits under this circular. At the same time, Judge R Subhash Reddy said that the question is whether Compound Interest should be demanded in the meantime. Moratorium and punitive cannot run simultaneously. RBI will have to clarify this.
What was the facility of the Moratorium?
In view of the lockdown, RBI had given the option of three months March, April, and May for not repaying the loan moratorium. Later RBI extended the period of this facility for another three months i.e. June, July, and August. As soon as the moratorium period ends on 31 August, customers are seeking to extend the period of this facility further. Along with extending the moratorium period, there is a demand to waive interest from March to September. Customers and petitioners argue that interest should not be charged on interest.
