Loan Moratorium: Government’s Proposals Don’t Address All Concerns, Petitioners Say

The decision to waive compound interest for the “most vulnerable category of borrowers” was taken at the highest levels, the government told the Supreme Court today.

The matter relates to “charging compound interest and credit rating/downgrading’’ during the six-month moratorium announced in the wake of the Covid-19 outbreak.

In response to the government’s affidavit proposing the waiver for certain borrowers, petitioners from the real estate sector and power producers complained that their concerns have still not been addressed. The parties told the court that they need more time to file a reply to the government’s affidavit and requested for an adjournment of the hearing on Monday.

‘’There are a lots of facts and figures in the affidavit which do not have any basis. We want to file a detailed reply so that the court has the data before it applies its mind on the issue,’’ Senior Advocate Kapil Sibal appearing for power producers’ association told the court.

The Solicitor General of India Tushar Mehta didn’t object to the petitioners’ request for more time but informed the court that the decision, outlined in the affidavit, was taken after considering a holistic view of the problem, after consulting the stakeholders and the resources available with the government.

The central government has decided to continue the tradition of hand-holding small borrowers and waive compound interest on loans up to Rs 2 crores. In its affidavit, the government has proposed waiver of interest on interest for loans in the following categories:

• MSME loans up to Rs 2 crore
• Education loans up to Rs 2 crore
• Housing loans up to Rs 2 crore
• Consumer durable loans up to Rs 2 crore
• Credit card dues up to Rs 2 crore
• Auto loans up to Rs 2 crore
• Personal loans to professionals up to Rs 2 crore
• Consumption loans up to Rs 2 crore

The court has granted one week time to the parties to file the reply to the government’s affidavit. It has also asked the government to place on record the Kamath Committee report which addresses the issue of big borrowers.

The apex court is hearing a batch of petitions seeking relief in the form of waiver of interest payment on these loans. The court, however, in previous hearings said it was inclined to examine whether there can be a relief on interest upon interest during the moratorium period.

The moratorium terms set by the Reserve Bank of India required borrowers to pay deferred interest, or what the petitioners in this case are referring to as interest on interest for the period of standstill.

The Supreme Court will now hear the matter on Oct. 13.