The high court asked the Center to know whether the benefit of the loan interest exemption for borrowers of up to Rs 2 million during the moratorium period has “leaked” to the common man.
The court, which noted that it is concerned about how the interest benefit waiver would be granted to borrowers, said the Center has made a “welcome decision” in noting the plight of the common man, but authorities have not issued no order about it.
“Something concrete must be done,” said a bank headed by Judge Ashok Bhushan, adding: “The benefits of exemptions for borrowers of up to 2 million rupees should be implemented as soon as possible.”
The high court, which released the matter for hearing on Nov. 2, told advocates who appeared for the Center and the banks that “Diwali is in your hands.”
The Center recently told the high court that going beyond tax policy decisions already made, such as waiving compound interest charged on loans of up to Rs 2 crore for a six-month moratorium period, can be “detrimental”. for the general economic scenario. , the national economy and banks cannot assume “unavoidable financial constraints”.
The high court is hearing a number of petitions that have raised issues related to the announced six-month loan default period due to the COVID-19 pandemic.
The bank, which also includes Judges RS Reddy and MR Shah, said that when the authorities have decided something, it should be implemented.
“The government has made a welcome decision taking note of the plight of the common man. But he has not given any order to anyone. They just gave us the affidavit, ”the court told Attorney General Tushar Mehta.
“Now we are concerned about how the benefit of the exemption will be granted,” the bank said, adding: “We are only asking if the interest exemption on the loan has been leaked or not.”
During the videoconference hearing, Mehta told the court that the Center has made an “informed decision” and has assumed a “huge burden.”
“When the central government says in an affidavit that it will be implemented, then there should be no apprehension,” Mehta said. “There is diversity in loans and different modalities are required.”
He said that banks would waive interest on interest and then they will be compensated by the government and the calculation will have different modalities.
“We tell them that it is a welcome decision but they want some concrete things,” observed the bench, adding, “we welcome the decision of the Center, the only thing that must be translated in a practical way.”
The court said that the Center can take steps to implement its decisions mentioned in the affidavits filed in court.
Lead attorney Harish Salve, who appeared for the banking association, told the bank that the banks would implement whatever decision the government has made.
Lead attorney Rajeev Dutta, who appeared before one of the petitioners, said banks are capitalizing by taking interest on interest on existing loans.
“We are little people with small loans (less than 2 million rupees). They shouldn’t increase interest in these cases, “Dutta said.
To this, the bank said that it already ordered that banks cannot declare NPA.
“We have already approved an order that prohibits the classification of NPAs and without a fiscal policy, the proposals cannot be altered,” he said, while asking the Center and the association of banks about when the benefits would be implemented.
“For these modalities a month is required”, asked the bank.
Salve said: “The complexity is such that it takes time.”
The court, however, said that the decisions made by the authorities must be implemented now.
The higher court is hearing petitions, including the one that has requested instructions to declare part of a notice from RBI, issued on March 27, “ultra vires to the extent that it charges interest on the loan amount during the moratorium period. … ”
The RBI recently filed an affidavit in the supreme court saying that a loan moratorium that exceeds six months could result in “vitiating overall credit discipline”, which will have a “debilitating impact” on the credit building process in the economy.
These affidavits were submitted following the October 5 high court order asking them to record the KV Kamath committee’s recommendations on debt restructuring due to Covid-19-related stress in various sectors, as well as the notifications and circulars issued so far on the loan moratorium.
It has also said that the provisional order of the superior court of September 4, which restricts the classification of accounts in non-productive accounts in terms of the instructions issued by the RBI, could be overturned with immediate effect.
Kamath’s panel had made recommendations for 26 sectors that lenders could consider when finalizing loan resolution plans and had said that banks could take a graded approach based on the severity of the coronavirus pandemic in one sector. .
Initially, on March 27, the RBI had issued the circular that allowed credit institutions to grant a moratorium on the payment of installments of term loans that mature between March 1, 2020 and May 31, 2020, due to the pandemic.
Subsequently, the moratorium period was extended until August 31 of this year.
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