New Delhi. The corona crisis and the lockdown caused by it had stalled economic activity. Borrowers were finding it difficult to pay their EMIs. In view of this problem, the SUPREME Court court, while hearing the Loan Moratorium case, said that bank accounts cannot be declared non-perferming assets (NPAs) for the next two months. After hearing the case, the three-judge bench said that customers whose bank accounts have not been NPA till August 31 should be given protection till the case is settled. A three-member bench comprising Justices Ashok Bhushan, R Subhash Reddy and M R Shah said the next hearing of the case will be held on September 10.
What did the Solicitor General and the judge say in the Supreme Court?
Arguing on behalf of the government and the RBI, Solicitor General Tushar Mehta told the Supreme Court that interest cannot be discounted but will ease the pressure on payments. Mehta said the banking sector is the backbone of the economy and no decision to weaken the economy can be taken.
The solicitor general said he believed that all the people who have had problems are right. The situation in each sector needs to be considered but the banking sector also has to be taken care of. Tushar Mehta said the moreoverium was not intended to waive interest. Corona conditions have had an impact on every sector, but there are some sectors that have performed well. Pharmaceutical and IT sectors are sectors that have performed well. He said that when the moratorium was brought, the aim was to make necessary use of the available capital and not to burden the bank’s instalment.
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Bank accounts not to be NPA on December 1
Arguing in the Supreme Court, Tushar Mehta said that the August 6 RBI circular exempted banks from fixing the loan recovery process. A committee has also been constituted to submit its report by September 6. He said that the npa usually gets the account if the loan instalment is not paid for 90 days. Therefore, the moratorium period was deprecated. The first three months and then three months will expand after. Bank accounts will not be NPA on 1 September.
During the hearing, Justice Ashok Bhushan said that the circular is not being challenged but relief is being sought. Justice Bhushan asked if those who have already been defaulters and their economic condition worsened due to corona will not get the benefit under this circular. Justice R Subhash Reddy said the question is whether to demand compound interest in the meantime. Moretorium and punitive can’t walk together. RBI will have to clarify on this.
What was the facility of moretorium?
In view of the lockdown, rbi had given the option of Three months March, April and May for not paying the loan disbursement. The RBI later extended the facility by another three months i.e. June, July and August. As soon as the moratorium period expires on August 31, customers are demanding further extension of the facility. There is a demand to extend the moretorium period as well as to waive interest from March to September. Customers and petitioner argue that interest on interest should not be charged.
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