The Supreme Court attended to the hearing on loan moratoriumtoday which has been getting adjourned from one hearing to another.
Currently, the hearing stands adjourned to November 2 withno decisions reached today.
The issue has its birth in the pandemic COVID-19 triggeredlockdown where almost everyone was forced within their four walls and theentire economy was brought to a standstill.
The government had agreed to waive “interest on interest” ofcertain categories of loans. Initially, the government denied any such waiverbecause doing so would have hurt the survivability of the banks underwritingthe loans. Upon intervention of the Supreme Court, and its guidelines toconsider the situation and help the borrowers, the government came up with aplan.
The rationale put forward by the government when theborrowers were given permission to seek a six-moratorium on all loans due tothe pandemic was that the lending institutions’ survivability would have becomea question if they went along with the proposal.
If all the categories of the borrowers were given therelief, then the amount would be about Rs 6 lakh crore. Such an amount woulddeal a severe blow to the net worth of the banks. However, if the benefit wasextended to a select list, then about Rs 2 lakh crore will be the burden on thebanks.
Later on, the RBI, in a fresh affidavit filed to the SupremeCourt, claimed that it is unable to extend loan moratorium beyond the six-monthperiod.
The rationale provided is that such a move “may result invitiating the overall credit discipline which will have a debilitating impacton the process of credit creation in the economy”. The RBI further said thatthe move can “increase the risks of delinquencies post resumption of scheduledpayments”
The hearing yesterday had no progress and it was adjournedto today.
Today, there was progress, but the hearing has beenadjourned to November 2.
The Supreme Court challenged the government as to why therewas delay in implementing the waiver of Rs 2 crore and why time till November15 is being requested, to which the government replied that the process iscomplex and will take time.
The government claimed that the deadline requested is anouter limit, the needful will be done before that date, while noting that thegovernment has taken a huge burden on itself and will not be causing anydelays.
The Supreme Court observed that while there is a delay, thelenders are charging “interest on interest”.
The government assured that the borrowers are protected frombeing classified as Non Performing Assets (NPAs)
Interestingly, on a lighter note, the Supreme Court remarkedthat the common man’s Diwali is now in government’s hands.