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Loan Moratorium Case in SC Highlights: Case adjourned to December 2; banks seek stopping overdraft facilities

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The Supreme Court will resume the hearing in the interest waiver or loan moratorium case soon. On November 19, the apex court had directed the Centre and the Reserve Bank of India (RBI) to respond to suggestions from the power sector while disposing of pleas in which the petitioners are satisfied with compound interest waiver.

Loan Moratorium Case in SC Highlights: Case adjourned to December 2; banks seek stopping overdraft facilities
The Supreme Court has resumed the hearing in the interest waiver or loan moratorium case. The apex court has disposed of the application of Gajendra Sharma seeking interest on interest waiver. The other applications of power producers and various state CREDAI are being heard.
A bench comprising of Justices Ashok Bhushan, R Subhash Reddy and MR Shah are hearing the case today.
Here are the latest updates:
  • Supreme Court: Case adjourned till December 02, 2020, Banks can follow normal rules of business.
  • Harish Salve for Indian Banks Assoc: People are drawing money from defunct accounts.SC must consider withdrawing order restraining banks from classifying accounts as NPAs. If not NPA, at least allow banks to stop overdraft facilities.
  • Credai Chattisgarh to SC: Seeking waiver of interest for the moratorium period. Charging of interest is not maintainable, not in keeping with the purpose of the RBI moratorium.
  • Individual Petitioner to SC: Credit score of people has been affected during the crisis and will affect future prospects. There is a lot of harassment from banks for recovery. A further relief is required in the form of interest waiver.
    • Kapil Sibal for Credai Mumbai to SC: Seeing for moratorium till the end of FY21. Seeking additional liquidity, emergency credit line.
    • Kapil Sibal for Credai Mumbai to SC: RBI and government's position is that contractual provisions will have to be adhered to, irrespective of a disaster of this magnitude. The position is that contractual provisions will prevail with or without Covid. As on September 1, 98 percent of the industry will become NPA. These are figures of the government. If court does not protect us, we will not be entitled to any relief. If SC does not protect, builders will not be entitled to any relief.
    • Solicitor General Tushar Mehta for Government to SC: There is a mechanism in place, issues should be allowed to be ironed out as per the mechanism. As per the economic state, various factors come into play for the govt to decide on the fiscal issue.
    • Harish Salve for Indian Banks Associaton to Supreme Court: SC had passed dormers restraining banks from classifying accounts as NPAs. "This restraining order should be vacated. Banks are rendered helpless against defaulting borrowers," he said.
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      On November 19, the apex court had directed the Centre and the Reserve Bank of India (RBI) to respond to suggestions from the power sector while disposing of pleas in which the petitioners are satisfied with compound interest waiver.
      The reliefs sought by power gencos in the last hearing -
      1. RBI to allow restructuring of funds borrowed from LIC, AIFs, FPIs, Foreign Banks. RBI currently allows restructuring only by banks, NBFCs, Cooperatives.
      2. Restructuring should be subject to request by borrowers, not subject to discretion of the lender.
      3. Restructuring requires logistical exercises such as forensic audit. Requirements such as these should be dispensed with.
      4. Lenders should be restrained from taking coercive measures such as invocation of bank guarantees.
       
      • The three-judge bench comprising of Justices Ashok Bhushan, R. Subhash Reddy and MR Shah heard a batch of petitions seeking interest waiver during the loan moratorium period on November 19.
      •  The apex court has directed power producers and other petitioners to submit suggestions before Reserve Bank of India (RBI) counsels. Further, it asked the Centre and RBI to reply to suggestions put forth before the bench on November 19.
      • With an aim to provide relief to borrowers during the COVID-19 pandemic, the RBI had in March announced a moratorium on repayment of term deposits for three months, which was later extended till August 31. The move was expected to give borrowers more time to clear payments of EMIs amid the economic fallout of the lockdown, without being classified as NPAs.
      • The RBI had on June 4 said that the banks will lose Rs 2 lakh crore if interest is waived during the moratorium period.
      • The bench on October 5 heard pleas seeking waiver of accruing interest during the six-month loan moratorium period. The apex court granted Centre and the Reserve Bank of India (RBI) time to file additional affidavits.
      • On October 2, the Centre told the apex court that it would waive compound interest on the repayment of loans of up to Rs 2 crore.
      • On September 3, the Supreme Court had instructed banks not to declare accounts as non-performing assets (NPAs) until further orders.
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        (This is a developing story. Please check back for updates.)

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