Satya prakash
Tribune News Service
New Delhi September 3
On Thursday, the Supreme Court ordered banks not to declare any non-performing loan account assets (NPAs) if they failed to do so on August 31, when the loan repayment moratorium plan announced by the RBI ended.
“Accounts not declared as NPA as of August 31 will not be declared as NPA for two months,” a three-judge bench led by Judge Ashok Bhushan said in an interim order.
The order protects those accounts from being declared as NPA that they were not on August 31.
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Protection against being declared NPA for such accounts will continue until petitions seeking exemption from interest on loans during the COVID19 close are removed, the issue post said for an additional hearing on Sept. 10.
In approving the provisional order, the Court, which also included Judge R Subhash Reddy and Judge MR Shah, noted that borrowers should be protected.
The order came after Attorney General Tushar Mehta and Chief Counsel Harish Salve, representing the Center and the Association of Indian Banks respectively, tried to convince the court why interest must be kept alive to save the banks.
Mehta said banks were free to deal with borrowers and offer solutions depending on their specific problems and needs. A one-size-fits-all solution cannot be awarded due to the difference in difficulties faced by different categories of borrowers, he said.
However, the Bank said that the RBI needed to issue certain directives to deal with the situation.
“What you do is up to you. Certain things must be decided by the Government of India and the RBI. You cannot leave everything to the banks,” the high court said.
During Thursday’s hearing, the Bank made it clear that it was considering primarily two issues: whether banks should charge interest on interest and whether the National Disaster Management Authority under the Disaster Management Act can provide relief with respect to to repay loans in disaster situations.
Announced by the RBI in March for three months, the loan moratorium is a legal authorization for debtors to postpone paying EMIs. It was extended to six months until August 31, 2020.
The RBI and the Center argued that a complete exemption from interest was not possible as banks also had to pay interest to depositors. The RBI had said that the enforced waiver of interest on term loans would endanger the financial health of banks and would also harm the interests of debtors.
Amid uncertainty over the loan repayment moratorium plan that ended Aug. 31, the Center and the RBI told the court on Tuesday that it could be extended up to two years in light of COVID19. However, no formal decision has been made in this regard.
The higher court, which handles petitions calling for the waiver of interest, or waiver of interest on EMIs suspended during the moratorium, had previously commented that it made no sense to charge interest on interest.
