Plea In Supreme Court For Loan Moratorium Amid COVID 3rd Wave

A lawyer has moved the Supreme Court of India seeking directions to the Union of India and RBI to consider his representation urging them to adopt measures like loan moratorium which could sufficiently redress the financial stress faced by the borrowers during Covid19.

The relief has been sought by Advocate Vishal Tiwari through an introlocutory application filed in the earlier writ petition that had sought financial relief in the form of fresh loan moratorium, extension of time period under the restructuring scheme and temporary cease on the declaration of NPA by the financial banks in the wake of the COVID-19 pandemic.

Observing that the Court cannot pass directions for financial relief, the Supreme Court had in June 2021 disposed of his writ petition. The Court had left it on the Government of India and Reserve Bank of India to assess the situation and take appropriate decisions.

According to the applicant, till date no structured policy making and guidelines have been developed and consequently there is no ground level enforcement and execution.

In the backdrop of the ongoing third wave of the covid pandemic, the applicant has stated that the reluctance and non-performance of policy makings and guidelines has brought jeopardy to the economy of India. And therefore it is important for the Court to intervene to assess the impact of COVID-19 on India's economy and to map the way forward.

The application has stated that the banking and robust credit facilities of the Indian economy has also witnessed a lowering graph, with the result of greater rate of income of people leading to minimum disposable income in hand leading to greater loan defaults thus consequently leading to loss making banking entities.

Further, the commercial borrowers have been prone to serious defaults of their loans with no repayment ability till today, the moratorium and restructuring facility has been time bound and has ceased to exist although the impact and existence of COVID-19 still exists.

Referring to the findings by India Ratings and Research (Ind-Ra), the applicant has stated that the second wave and its demand disruption will continue to impact borrowers at the bottom of the pyramid. The trend is expected to continue to affect further concerning loan pool collections due to borrowers' stretched liquidity and collection disruption on the side of lenders.

Details of the Representation:

While noting that the Apex court has also held that the Government can adopt decisive policy in financial matters, the Representation requested the Government and Reserve Bank of India to take necessary steps to benefit borrowers in the following ways:

* By providing relaxation in paying EMI's,

* By not turning the Accounts NPA By not evicting, dispossessing and auctioning of any property by the lending institutions till the Situation eases and normalises

* By protecting the borrowers from the illegal and violent methods of Recovery.

The representation has stated that the circular issued by RBI on May 5th 2021 as "Resolution Plan 2.0 for the MSMEs and Individual borrowers" is not sufficient to provide immediate relief to the borrowers in the present pandemic, as it speaks about eligibility criteria which prevents the vast number of borrowers from getting benefit of it.

Referring to stay operating on declaration of NPAs till 23rd march 2021 granted by Supreme Court, the Representation had stated that the relief was granted by RBI from 1st of April 2021. According to the Representation, the borrowers whose accounts have been turned NPA in between 24th march 2021 and 31st march 2021 should also be permitted to get benefit of the circular dated 5-5-2021 resolution plan 2.0.

The Representation also raised another important issue of non-cooperation shown by Banks towards the borrowers and Account holders, saying that the circulars and reliefs issued by the RBI in the present pandemic and earlier, are not implemented by the banks in their letter and spirit.

According to the Representation, many lending institutions use illegal methods for recovery by sending Goons, making abusive phone calls to borrowers and threatening them, which cannot be permitted under rule of law and is against fair practice code.

Case Title: Vishal Tiwari vs Union of India