Consider dropping interest on interest during loan moratorium: SC
New Delhi: The Supreme Court on Thursday asked the Centre to consider a plea for not charging interest on interest on deferred EMIs during the moratorium period and also not downgrade the credit/asset classification of the borrowers.
A bench of Justices Ashok Bhushan, R. Subhash Reddy and M.R. Shah asked the Centre, the Reserve Bank of India and the banks to put their heads together within two weeks to decide on crucial issues — sector-specific loan restructuring, charging of interest on interest, etc — and then come up with a concrete decision.
Solicitor General Tushar Mehta, appearing for the Centre, submitted that an expert committee at the highest level has been set up to take decisions on the issue of moratorium extension, interest on interest during moratorium and other connected issues.
Senior advocate Harish Salve, appearing for the Indian Bank Association, submitted that the RBI and other banks be given time to respond on the prayers made on Thursday. He submitted that the banks have been following a broad system of banking and without considering their stand, no interim order be passed at this stage.
The top court said it is inclined to grant two weeks to the Centre to file an appropriate affidavit and it will consider different prayers made by petitioners on the next date.
“In view of the aforesaid request made by Tushar Mehta, Solicitor General, and counsel for banks, we grant two weeks time to file appropriate affidavit to reply the issues which have been raised before us. All decisions taken by the government of India, Reserve Bank of India or the different banks should be placed before the court for consideration,” said the bench.
The top court observed that its interim orders, where it had said that accounts not declared NPAs on August 31, shouldn’t be declared NPAs till further orders, shall continue till the next date of hearing.
Counsel for the petitioners also expressed their concern with regard to individual loans, apart from other sectors, contending that individuals are more adversely affected during this period of pandemic.
“It is submitted that individuals are more adversely affected during this period of pandemic. Counsel for the petitioners have also submitted that banks are debiting interest as well as interest on interest from the accounts of the creditors. It is further submitted that credit rating is also being downgraded which may have adverse effect, with regard to various account holders,” the bench noted.
The top court will now take up the matter on September 28. “As noted above, on the next date of hearing, the specific instructions with regard to charging of compound interest and credit rating/downgrading during moratorium period shall be obtained, so that appropriate order be issued on the next date of hearing,” it said.