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Photo: iStock
Photo: iStock

Apex court to hear pleas seeking relief on loan moratorium on Thursday

Petitioners seeking relief in terms of waiver of interest over interest include power producers and builders among others. They also sought relief on the interest charged by banks and NBFCs.

The Supreme Court adjourned to Thursday the hearing on the batch of petitions seeking relief on the six-month loan repayment moratorium announced amid the covid-19 pandemic. Earlier in the day, the apex court had deferred the hearing to the end of the board.

A bench headed by justice Ashok Bhushan and comprising justices R.S. Reddy and M.R. Shah, deferred the hearing after solicitor general Tushar Mehta said it will be difficult for him to attend the hearing in the latter half of the day on Wednesday.

Petitioners seeking waiver of interest on interest include power producers and builders. They also sought relief on the interest charged by banks and non-banking financial companies (NBFCs). On the previous date of hearing, the court had directed all the parties to file their documents.

The Centre, in its affidavit filed in October, had informed the court that it has decided to waive the ‘interest on interest’ during the six-month moratorium allowed by the Reserve Bank of India (RBI).

However, the compounding of interest will only be waived for micro, small and medium enterprises (MSMEs) and personal loans of up to 2 crore. The categories include MSME loans, besides education, housing, consumer durables, credit card, auto consumption and professional loans.

The central government had also apprised the bench that lenders have been asked to credit into the accounts of eligible borrowers the difference between compound and simple interest collected on loans of up to 2 crore during RBI’s loan moratorium scheme by 5 November.

On 14 October, the apex court had observed that the Centre should implement “as soon as possible" the interest waiver on loans of up to 2 crore saying the common man’s Diwali is in the Union government’s hands.

On 3 September, the court passed an interim direction holding that the accounts not declared as non-performing assets as of 31 August will not be declared as NPAs until further orders. The interim order was extended on the last date of hearing.

The central bank had on 22 May extended its moratorium on term loans till 31 August amid the nationwide lockdown due to covid-19. In March, the central bank had allowed a three-month moratorium on paying EMIs and on all term loans due between 1 March and 31 May.

Petitioner Gajendra Sharma submitted that the interest would continue to accrue during the moratorium, which ultimately the borrower would have to pay. The petitioner argued that no interest should be charged during the moratorium because people are facing “extreme hardship’.

Sharma said paying additional interest on top of regular EMIs would be difficult.

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