RBI Loan Moratorium - Pleas against interest on term loans
RBI Loan Moratorium - Pleas against interest on term loans
Litigation News

RBI Moratorium: Responsibility on banks to credit compound interest waiver: Centre to SC [LIVE UPDATES]

ByBar & Bench

The Supreme Court is hearing petitions challenging the Reserve Bank of India's move to charge interest on term loans during the moratorium period introduced in light of the COVID-19 pandemic.

The Bench of Justices Ashok Bhushan, R Subhash Reddy and MR Shah is hearing the matter.

Earlier, the Supreme Court had granted the Central government and the Reserve Bank of India (RBI) time to file affidavits detailing the steps to be taken for the enforcement of the recommendations made on the waiver of compound interest for small borrowers.

The Court additionally asked the Centre and the RBI to reveal the steps that will be taken to address concerns pertaining to sectoral relief raised by power producers and real estate associations

Live updates of the hearing today feature on this page.

SC resumes hearing. A petitioner expresses gratitude towards FinMin, RBI for handholding small borrowers Justice MR Shah: Then withdraw your petition

Solicitor-General Tushar Mehta: please have a look at Oct 9, 2020, affidavit. I am giving a broad outline without delving into the nitty-grities.

SG: Several pleas came to be filed saying that sector specific plan should be evolved under Article 32 petition. Taking pandemic as a national disaster, these are valid measures taken by Govt of India through Finance ministry and RBI.

SG: 20,000 cr Aatmnirbhar package announced, 19.8k cr liquidity to power distribution cos. We allowed loan restructuring since no more scope for further help by Centre. Relief was also given to real estate sector, 3 lakh cr for MSMEs.

SG lists out various measures taken by finmin and RBI. Restructuring and liquidity measures for sectors such as power, retail, MSMEs, etc.

SG refers toKamath committee's report on restructuring of big loans, states that separate mechanism for restructuring small loans by lending institutions is provided. 

Justice MR Shah: Were Kamath committee's recommendations not for big borrowers? SG clarifies they were for big borrowers, applicable to lending greater than 1,500 cr

SG: Complete elasticity (has been) given to banks, resolution plans and payment plan can be rescheduled. Granting moratorium based on income stream of borrower.

SG: SG: Those accounts not covered in Kamath committee reccos don't have to wait Banks already approaching account holders to get loans restructured. Resolution can't be invoked before Dec 31, 2020. Pre-COVID defaulters can't benefit from fresh resolution framework 

SG: Resolution can't be invoked before Dec 31, 2020. Committee studied commercial situation, spoke to stakeholders and assessed stress in various sectors. Disaster Management Authority has done whatever it could. NDMA has already done what it could under law.

SG: IBC process is already suspended since March to stop companies from slipping into bankruptcy

Finance Ministry through Solicitor General Tushar Mehta tells Supreme Court that it is the responsibility of banks to credit compound interest waiver for loans up to 2 crores, not for consumers to remind the banks of this scheme.

SG: We have taken a decision that those who have paid EMIs during moratorium cannot be punished. Whether they have availed moratorium or not availed, or partly availed - all are eligible.

SG: Banks have to lodge claim withSBI for which a separate nodal agency is created. They’ll verify, take it from government and then pay it.

SG: I am a credit card holder and I received SMS for ex gratia credit. Court: but do you need it? People like you should not get the benefit. 

Justice Bhushan: People with credit cards should not be given this benefit, they are purchasing things using the card and they don't have a loan.

SG: This is not a case of no action. Even if the petitioners say that there can be a better option that too cannot be an opportunity for this Court to interfere under Article 32. Sector specific plan is perhaps not possible in this case under 32

Dr Abhishek Manu Singhvi: I am grateful that SC has considered that these are extra ordinary times. I am not seeking liquidity injunctions for specific relief.

Singhvi is representing association for generating companies: We are a special and abused class. Even Pre- Covid parliamentary standing committee on March 7 this year talks about how power must be supplied under schemes even if restructuring takes place.

Dr. Singhvi: Minor tweaking can give a relief to a lot of segments. It is not something for which court needs to give a mandamus. These are circulars which needs to be inclusionary.

Dr Singhvi: In the Additional affidavit filed on Oct 9 it notes that power sector has a huge importance for the ones who have taken power from them.

Not even the transmission, but it is the generating companies which are suffering the most. Now there is a total debt of 1.2 lakh crore.

Singhvi: Alarge part of the borrowings cannot be restructured due to certain exclusions. A large part of the borrowings is by LIC. These loopholes needs to be rectified by RBI. I am seeking actual relief.

Singhvi: benefit of restructuring should be allowed at an opt in or opt out stage. Here, Centre says restructuring can only be initiated at the instance of the lender

Singhvi: Minor tweaks are required. RBI needs to revisit the circular and make these changes.  

Singhvi: Banks are not proceeding to recover loans but then want to recover guarantees. Your lordship is not permitting something but its like you don't do it with left hand but do the same thing with the right hand.

Singhvi: Please formally issue notice and ask them to respond. SC: We have heard you. SG: They can make a representation, why issue notice?

SG: Dr. Singhvi may have or may not have some point. But he can approach RBI rather than keeping the matter pending.

SC: Let suggestion be made to RBI. We are not deciding anything now.

Senior Adv Rajiv Dutta: All this has happened only with the interference of this Court

SG: Let us not go into all of this SC: We are disposing off Mr Duttas plea.

Dutta: first two affidavits of RBI needs to be dealt with Justice Bhushan: We are disposing off your petition. You have already said twice that you want to Senior Adv Huzefa Ahmadi: We had filed an IA in Mr Dutta plea. Please keep it open

SC: Mr Singhvi appeared for power generation companies. He will submit his arguments to SG and RBI. He may do so by tomorrow. Mr Duttas plea is disposed off. IA in that plea be kept alive. List matter next week

Senior Adv V Giri: all those persons have issues they need to send representation to RBI. So that we can come with responses.

Supreme Court: All parties to file short submissions/suggestions to RBI and Centre before the hearing so that appropriate response be given.

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