Loan Moratorium Case: Facing Great Difficulties with Interim Order on NPAs, says RBI to SC

The Reserve Bank of India told the Supreme Court on Thursday, 5 November 2020 that it is facing “great difficulties” with the court’s interim order against declaring as non-performing assets (NPAs) accounts found perfectly good till August 31, 2020.

On September 3, the apex court had, as an interim measure considering the hardships of the pandemic and moratorium, directed that “accounts which were not declared NPA till August 31, 2020 shall not be declared NPA till further orders”.

Appearing before a Bench, led by Justice Ashok Bhushan, RBI Counsel V Giri submitted that “the interim order imposed is causing great difficulties for the RBI.” Giri urged the court to hear the RBI on this issue on the next date.

The court listed the case for November 18 as Solicitor-General Tushar Mehta, who appears for the government and also the RBI, was arguing before another court at the time.

Main petitioner satisfied

During the short hearing, the main petitioner, who represented individual borrowers in the Supreme Court, expressed satisfaction with the government scheme to pay back the difference in the compound and simple interest charged during moratorium for eight categories of loans worth up to ₹2 crore each.

Senior advocate Rajiv Dutta, appearing for individual borrowers and the main petitioner Gajendra Sharma, said: “We are grateful and would like to withdraw the writ petition. Please record my submission”.

The pay-back scheme is meant to bring “additional relief” to borrowers affected by the pandemic-induced financial distress.

“The Central government has directed that all lending institutions shall give effect to the scheme and credit the amount calculated as per the scheme into the accounts of the borrowers by November 5,” the Finance Ministry said in a short affidavit.

All lending institutions will credit the difference between the compound and the simple interest on loans in the respective accounts of eligible borrowers for the period between March 1 and August 31, the affidavit said.

The scheme will cover MSME, education, housing, consumer durables, credit card, auto, personal and consumption loans.

Clause three of the waiver scheme defines “all financial institutions” to include banking companies, public sector banks, cooperative banks, regional rural banks, all India financial institutions, non-banking financial companies, housing finance companies registered with RBI, national housing banks.

The RBI has already informed the Supreme Court about its advisory to banks and financial companies to fully comply with the government scheme to pay back borrowers’ interest on interest charged on their loans during the six-month moratorium period.

The Union Cabinet had approved the scheme on October 21.