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Excl: CNBC-TV18 accesses copy of government's affidavit on interest waiver submitted in SC

Excl: CNBC-TV18 accesses copy of government's affidavit on interest waiver submitted in SC

Excl: CNBC-TV18 accesses copy of government's affidavit on interest waiver submitted in SC
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By Ritu Singh  Oct 4, 2020 11:25:17 AM IST (Updated)

In a big relief for borrowers, the Narendra Modi government told the Supreme Court that it will waive interest on the repayment of loans of up to Rs 2 crore.

In a big relief for borrowers, the Narendra Modi government told the Supreme Court that it will waive interest on the repayment of loans of up to Rs 2 crore.

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In its affidavit, which has been exclusively accessed by CNBC-TV18, revealed that the waiver will apply for loans taken by MSMEs (Micro, Small and Medium Enterprises), for educational, housing, consumer durables, auto, personal loans, and for credit card dues. However, any individual/entity whose lone amount is more than Rs 2 crore will not be eligible for a waiver of the compounding of interest.
The Centre further states that the government will seek due authorisation from Parliament for making appropriate grants in the regard, "This endeavor 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 the government earlier, the affidavit said.
Coming to the possible downgrading of non-performing assets (NPAs), the affidavit said, "The resolution framework announced by RBI provides that loan accounts which slip into NPA between invocation and implementation may be upgraded as Standard on the date of implementation itself."
"To illustrate, if a borrower had defaulted on, say, February 10, 2020, such borrower would be eligible for invoking restructuring as the account was less than 30 days overdue on 14 March 2020. Invocation of restructuring is now done on, say, October 9, 2020, and completed by, say, November 9, 2020. Even if the account slips to NPA on 10 October 2020, it could be Standard on 9 November 2020. Thus, any account becoming Non-performing even due to the bank's or any other delay, need not suffer from being labeled as NPA," the filing said.
The government also stated that there will not be any NPA downgrade for defaults during the moratorium by the credit rating agencies as the Securities and Exchange Board of India (Sebi) had already issued a circular on March 30, 2020, providing for relaxation from the recognition of default due to the moratorium. On August 31, 2020, it has further specified that in cases of restructuring, the same may not be considered a default by rating agencies.
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