The Supreme Court on Thursday gave in to a persistent plea of the Union government for two more weeks to brainstorm with the Reserve Bank of India (RBI) and banks on crucial issues such as sector-specific loan restructuring, charging borrowers’ interest on interest for loans deferred during the moratorium period. The next hearing is scheduled on September 28.
Solicitor General Tushar Mehta said told a Bench led by Justice Ashok Bhushan that deliberations were being held at the “highest level” of the government.
Also read: Relief for borrowers in moratorium case
Individual borrowers and various sectors of commerce and industry, including traders, power and real estate, urged the court to pass an interim order extending the loan moratorium that expired on August 31.
They said loan restructuring would not help as banks have already started debiting interest on interest. Their credit ratings and asset value have dipped. This has seriously affected the confidence of account holders. The worst-hit are the individual borrowers, who have come out of the moratorium period only to find that they are supposed to pay interest on loan interest deferred during the moratorium.
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But the court, which was on the brink of passing an interim order, merely went on to record the versions of the government and the borrowers before deciding to wait for the results of the “deliberations being held at the highest level”.
Expert panels formed
Its order recorded the government had formed “expert committees” that would file reports. The government had promised action.
Mr. Mehta assured the court, “We are going into the problem in a holistic way”.
Justice M.R. Shah told him, “You must have a complete and clear policy. Whatever is there it should be very clear”.
Mr. Mehta said it would be a “self-contained policy”.
On the other hand, senior advocate Rajiv Dutta, for an individual borrower, said status quo as on August 31 should be maintained till the government took a decision. The virus has created a severe dent in the earning capacity of a large part of the population.
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“Banks are already charging compound interest. Everything is computerised. They are trying to restructure corporate loans. Lakhs of people were hospitalised during the pandemic. Some of them were the only earning member of their family”, he submitted.
Senior advocate Kapil Sibal, appearing for the real estate sector, said restructuring would help only 5 per cent of its loans. The rest cannot be restructured if the present policy was followed.
Senior advocate C.A. Sundaram also agreed with Mr. Sibal and Mr. Dutta that the court should pass an interim order extending the moratorium till the government took a decision.
Bankers’ contention
Appearing for the bankers, senior advocate Harish Salve observed that since the PIL had taken an adversarial note, no order should be passed by the court without hearing him.
Also read: Loan moratorium ‘extendable to two years’, says Solicitor General in Supreme Court
Senior advocate Mukul Rohatgi, for the State Bank of India, stated that defrauders would take advantage if interim orders were passed by the court.
Mr. Salve said, “Downgrading is if your credit rating is too low, then you cannot take further loans. Are they [borrowers] going to take loans in two weeks?”.
Also read: Relief for borrowers in moratorium case
Senior advocate V. Giri, for the RBI, said the “restructuring policy is being done at the highest level”.
Addressed parties on both sides of the fence, Justice Shah said, “We are here to find out a way. A solution”.
