The Centre had recently told the apex court that waiver of interest on deferred EMIs during the moratorium period would be against 'the basic canons of finance' and unfair to those who repaid loans as per schedule.
The Supreme Court Thursday directed that accounts, which were not declared as non-performing asset till August 31 this year, shall not be declared NPA till further orders. A bench headed by Justice Ashok Bhushan said this while hearing a batch of pleas which have raised the issue of interest being charged on instalments which were deferred under moratorium period due to COVID-19 pandemic. The apex court passed the order while noting the submissions of senior lawyer Harish Salve, who appeared for banks’ association and said that ‘no account shall become NPA at least for a period of two months’.
“In view of the above, the accounts which were not declared NPA till August 31, 2020 shall not be declared NPA till further orders,” said the bench, also comprising Justices R S Reddy and M R Shah. Solicitor General Tushar Mehta, who appeared for the Centre and the Reserve Bank of India (RBI), said that banking sector is the ‘backbone of the economy and every sector and every economy is under stress due to the pandemic.
Mehta said it is an accepted position worldwide that waiving off interest is not a good option for revival of economy.
While referring to the grievance raised by the petitioners, the bench said, “We are concerned with interest on the interest.” The arguments in the matter remained inconclusive and would continue on September 10.
The Centre had recently told the apex court that waiver of interest on deferred EMIs during the moratorium period would be against ‘the basic canons of finance’ and unfair to those who repaid loans as per schedule. Reserve Bank of India has however come out with a scheme which provides for extension of moratorium for two years to certain stressed borrowers, the Centre had informed the top court.
The Ministry of Finance had filed an affidavit before the apex court, which had earlier asked the Centre and the RBI to review the move to charge interest on EMIs and interest on the interest during the moratorium period introduced under the scheme due to COVID-19 pandemic.
The solicitor general had told the bench that moratorium period on repayment of loans amid the pandemic is ‘extendable’ by two years. The pleas filed in the apex court have raised issue pertaining to validity of March 27 circular of the RBI which allowed lending institutions to grant moratorium on payment of instalments of term loans falling due between March 1, 2020 and May 31 this year due to the pandemic. Later, the period of moratorium was extended till August 31.