"Their Diwali Is In Your Hands": SC Seeks Centre's Response On Implementation Of Benefits To Small Borrowers By November 2

The Supreme Court on Wednesday pulled up the Centre as for its delay in implementation of their decision for providing benefits to small borrowers who had taken loans of up to 2 Crores.

A bench comprising Justices Ashok Bhushan, R Subhash Reddy and MR Shah told the Centre that even though it had welcomed its decision of relieving the smaller borrowers, there was no reason to delay the implementation of the said decision.

"Their Diwali Is In Your Hands, Mr. Mehta."

- Supreme Court of India

The Reserve Bank of India (RBI) had told the Supreme Court that the Centre has agreed 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 COVID-19 pandemic.

Today, when the matter came up for hearing, the bench enquired from Solicitor General Tushar Mehta as to when the decision will be implemented and circulars will be issued to the respective banks.

SG: With a view to ensure there is no default and considering the assurance given, why won't the govt. do it as early as possible?

Justice Shah: People are worried in terms of their accounts and for interest on interest.#loanmoratorium #InterestRate #nifty #interestwaiver

— Live Law (@LiveLawIndia) October 14, 2020

At tis juncture, the law officer informed the bench that there was diversity in lending and different modalities are required to be followed. "Consultations are on between the required stakeholders," he added.

Senior Advocate Harish Salve said that the implementation will be done as the Government had already taken a decision to give relief to smaller borrowers.

Justice Bhushan: For these modalities you require one month time?

Salve: The complexity is such, it requires time.

Justice Bhushan: That is not correct. They should implement now.#loanmoratorium #interest #InterestRate #interestrates#nifty #interestwaiver #IndianEconomy

— Live Law (@LiveLawIndia) October 14, 2020

The bench also added that it had always permitted the Government to take as much time as they required so that they could come back with instructions but that it was not in the interest of the common man to continue delaying the implementation.

"Please see the plight of the common man," remarked Justice MR Shah

The SG then went on to explain that Banks waive interest on interest & then will be compensated by Govt and the calculation will have different modalities. "We will have to ensure that bank gives us a proper format," he added.

Bench then went on to indicate that they will take up the case on November 2 and that it expected the Government to tell the top court about the implementation of the aforesaid benefits.

On September 3, Supreme Court on protected those accounts from being declared as Non-performing Assets (NPAs) which were not classified as NPAs on August 31 till case is disposed off. This interim protection shall also continue till further orders.

Advocate Vishal Tiwari's made submissions regarding illimitable discretion of banks. 

In an affidavit filed by Union finance ministry on behalf of the Union of India, it said that the relief to all borrowers in respect of compounding of interest during the period of moratorium would be admissible to the categories specified irrespective of whether the borrowers had availed the moratorium or not.

"The government, therefore, has decided that the relief on waiver of compound interest during the six-month moratorium period shall be limited to the most vulnerable category of borrowers. This category of borrowers, in whose case, the compounding of interest will be waived, would be MSME loans and personal loans of up to Rs 2 crore," it said.

It further said that any individual/entity whose loan amount is more than Rs 2 crore will not be eligible for waiver of the compounding of interest.

The affidavit has been filed by the Centre in response to a batch of pleas in the apex court raising issues pertaining to validity of RBI's March 27 circular which allowed lending institutions to grant moratorium on payment of instalments of term loans falling due between March 1, 2020 and May 31 this year due to the pandemic.

Later, the period of moratorium was extended till August 31.