The court also extended the temporary immunity to the relevant loan accounts from being classified as NPA till September 28, when it will likely pronounce its final order.
Stating that “it is keen to waive interest on interest” for the borrowers who availed themselves of the moratorium facility extended by the government in the wake of Covid-19, the Supreme Court on Thursday gave a ‘last chance’ to the government and the RBI to come up with a ‘concrete plan’ with regard to the vexed issue. The court also extended the temporary immunity to the relevant loan accounts from being classified as NPA till September 28, when it will likely pronounce its final order.
Meanwhile, the government-RBI-banks combine and the petitioners, comprising assorted borrowers including real estate and power companies, resorted to heated arguments during Thursday’s hearings, with the former calling the petitioners’ stance as ‘adversarial’, and the court coming to the petitioners’ defense.
Solicitor general Tushar Mehta told the court the government was considering “all the issues at the highest level and is in discussions with banks and other stakeholders to work out a holistic solution aimed at revival of the economy”. “Meetings have taken place and concerns are being examined, but the government needs another two weeks to file a concrete response considering all the sectors,” he said, adding an expert committee has been constituted to look into the issues.
Senior counsel Mukul Rohatgi on behalf of SBI argued that borrowers were seeking ‘broad-based reliefs’ and cautioned that fraudulent elements might try to misuse any such relief. “Lakhs of crores are due to me (SBI) as the largest lender. Fraudulent elements will also seek benefits under any relief allowed by SC,” he said.
Affirming its commitment to protect the borrowers, whose repayment capacity has been affected by Covid-19 and lockdown, the apex court, in an interim order on September 3, had asked the government and RBI that the accounts which were not declared NPA as on August 31, the day a six-month moratorium period ended, should not treated as NPAs till its further orders. It also asked banks not to take any coercive action against borrowers.
A Bench led by justice Ashok Bhushan while granting two weeks to the government and RBI to file appropriate affidavit on the issues, said: “We are giving time to the Centre, but take a concrete decision. All decisions taken by the GoI, RBI, or the different banks should be placed before the court for consideration…on the next date of hearing, the specific instructions with regard to charging of compound interest and credit rating/downgrading during moratorium period shall be obtained, so that appropriate order be issued on the next date of hearing (September 28).
Senior advocate Kapil Sibal, representing real state developers’ body Credai, argued that current restructuring of loans (as allowed by RBI) won’t provide relief to 95% of borrowers. “Downgrading of borrowers is still continuing and they must be protected,” he said while seeking extension of loan moratorium and stay on downgrade and interest levy
It may be recalled that the government drew the court’s attention to the facility of one-time restructuring of loans announced by the RBI and flagged it as a viable way of addressing the plight of those borrowers, who are not defaulters by nature, without compromising on financial stability.
Senior counsel Harish Salve, appearing for the Indian Banks Association, opposed any stay on downgrading. “How can we not downgrade accounts of certain borrowers despite Covid impact? Downgrade represents borrowing capacity and is based on many factors. The litigation has now turned adversarial. Realty, power sectors are pushing for undue reliefs,” he said.
Senior counsel V Giri, on behalf of RBI, contended that “downgrading will take place only as per norms. Delay of two weeks as sought by the SG won’t affect borrowers. The issue is being considered at the highest possible levels”.