The Supreme Court on Tuesday heard a batch of petitions requesting the extension of the loan moratorium period and waiver of "interest on interest" amid the COVID-19 pandemic. During the hearing, the 3-judge bench of Justices Ashok Bhushan, R Subhash Reddy and M R Shah adjourned the matter since the time had exceeded past limit and Justice Bhushan was to sit for another session post the lunch-break.
Earlier, the Reserve Bank of India had told the top court that a loan moratorium exceeding six months might result in “vitiating the overall credit discipline”, which will have a “debilitating impact” on the economy.
“A long moratorium exceeding six months can also impact the credit behaviour of borrowers and increase the risks of delinquencies post resumption of scheduled payments.” “It may result in vitiating the overall credit discipline which will have a debilitating impact on the process of credit creation in the economy. It will be the small borrowers which may end up bearing the brunt of the impact as their access to formal lending channels is critically dependent on the credit culture,” the RBI's affidavit said.
The Centre has also put its official stand on the record, opposing any further interest waiver for any specific category of borrowers saying that its effects could be "detrimental" to the overall economy. The government, in its affidavit, had said that it will seek due authorisation from Parliament for making appropriate grants in this regard and "the endeavour shall be over and above the support of Rs 3.7 lakh crore to MSMEs, Rs 70,000 crore for home loans etc. already extended through the Garib Kalyan and Aatma Nirbhar packages announced by government earlier".
The SC, on October 5, had asked the Centre and the RBI to file fresh affidavit's in the case, placing on record the KV Kamath committee recommendation on debt restructuring in the backdrop of the Coronavirus pandemic. The matter is slated for further hearing on October 14.