The chances of a further debilitating court-imposed burden on banks and the chess board in the form of broader borrower debt relief appeared to be diminishing on Wednesday. Hearing a batch of petitions asking for a waiver of interest on deferred IMEs during a six-month repayment moratorium that ended on August 31, the Supreme Court said, “We welcome the government’s decision to donate a helping hand to small borrowers, ”but stressed that the decision should be implemented at the earliest.
The court asked the Center why it was “taking so long” to implement the compound interest exemption program promised on loans up to 2 crore rupees. He asked the government to present the notifications / orders by November 2, the next hearing date.
At a previous hearing, the court said the project was “unsatisfactory” and asked the government and the central bank to record the action taken on the KV Kamath committee report on debt restructuring. He even urged the governmentRBI take into consideration the questions raised by real estate associations and electricity producers faced with the increase in the weight of their debt.
As previously reported by FE, waiving compound interest under the scheme proposed by the Center in an affidavit would cost the Center only Rs.6,500 crore. However, the government had said in an affidavit that extending interest relief to all “all types of loans for all categories of borrowers” would result in a huge charge of Rs 6 lakh crore on banks, wiping out probably a large part of their net worth. and even make most of them non-viable.
Last week, the government and the RBI had ruled out any further waiving of interest on interest, or its composition, as this will entail significant economic costs that cannot be absorbed by banks without seriously damaging their finances, which in its turn will result in significant economic costs. round will have huge implications for depositors. and broader financial stability.
Refusing to give a month to implement the interest relief on loans of up to Rs 2 crore, a judiciary composed of Judges Ashok Bhushan, R Subhash Reddy and MR Shah said: “Why would it take so much time to implement it? Common people are worried. Delaying is not in the interest of ordinary people. We are concerned about people with a loan of up to Rs 2 crore.
“We have always allowed the government to come back with instructions, but it is not in the interest of the people to continue to delay once you decide. Please see the plight of an ordinary man. You haven’t given any orders to anyone. You should have done it at the banks, ”the judges observed.
Solicitor General Tushar Mehta told the bench that the outer limit for granting relief is November 15. “It’s a bit hard for the government. We have nothing to gain by delaying the implementation… The banks will waive the interest on the interest and will then be compensated by the government and the calculation will have different terms. We’ll have to make sure the bank gives us an appropriate format. All this will take time to calculate the interest to be paid by the government to the banks, “argued the SG, adding that” November 15 is the outer limit for implementation, but the government will try to implement it again. earlier than that ”.
Senior lawyer Harish Salve, representing the Indian Banks Association, echoed similar views, saying the large number of loans issued in the “up to Rs 2 crore” category makes the process somewhat time consuming and that there is no doubt about the implementation of the government’s decision. “The complexity is such, it takes time,” he added.
The government reiterated that banks are fully empowered to resolve Covid-19 stress and tailor reliefs to individual borrowers, other than large borrowers, by providing various concessions / relief, in terms of changing the interest rate. or by taking discounts.
Under the RBI’s special window, lenders are allowed to recast loans to stressed individuals and businesses without classifying them as non-performing, provided they set aside 10% provisions on those advances.
On September 3, the SC ordered banks to report loan accounts that were not NPAs by August 31.