Centre's Interest Waiver Plan Fails To Deal With "Many Issues": Top Court

For the categories specified by the government, the waiver on interest will be irrespective of whether the borrower has availed of the moratorium.

The Supreme Court today said the centre's affidavit on waiving "interest on interest" on loans up to Rs 2 crore, frozen during a six-month moratorium granted because of the coronavirus crisis, was not satisfactory and asked for a do-over in a week. The affidavit "fails to deal with several issues raised by petitioners", the court said. The central government has been asked to consider the concerns of real estate companies and power producers in fresh affidavits. The Supreme Court also noted that "no consequential orders or circulars" were issued by the government or RBI on enforcing the centre's decisions. The top court was hearing petitions on a waiver of interest on deferred EMIs - or interest on interest - to help small borrowers during the coronavirus pandemic.

Here are 10 things to know:

  1. The Supreme Court asked the government whether recommendations made by the KV Kamath panel had been accepted. "The affidavit does not say what has been done with respect to the Kamat Committee report... If it has been accepted, put in public domain," said the judges.

  2. The government's counsel said the report would be put on record, asserting that "there is nothing to hide". "The issue is not about placing report on record but about implementing the report... The Centre and the RBI should make certain orders so that people know what benefit is extended," said the top court.

  3. In August, the central bank had set up an expert committee under eminent banker KV Kamath to suggest solutions for restructuring loans for big borrowers and the panel had proposed graded corporate loan restructuring. This month, the RBI broadly accepted recommendations made by the panel, which identified 26 sectors that could be supported against the COVID-19 crisis.

  4. On Friday, the centre had told the top court in its affidavit that it would waive the compound interest component on small businesses and some other loans related to education and housing, and credit card dues, to help borrowers.

  5. "A lot of facts and figures in the government's affidavit are without any basis and the finance ministry's estimate that waiving off interest on loans to every category would cost banks Rs 6 lakh crore is wrong," argued Kapil Sibal for CREDAI. Ariyama Sundaram, appearing for real estate firms, agreed with Mr Sibal and sought time to file a reply to the centre's affidavit. "There is no relief for the real estate sector from the centre... No loan restructuring has been given to us," he said.

  6. The CREDAI or Confederation of Real Estate Developers' Associations of India - which is the top association of private real estate developers in the country - also disputed the finance ministry's estimate that waiving off interest on loans to every category would cost banks Rs 6 lakh crore. CREDAI is one among a number of representations from different sectors involved in the case.

  7. According to the government's filing to the top court on Friday, the interest waiver will apply for loans taken by micro, small and medium enterprises (MSMEs) for educational, housing, consumer goods and auto loans, and for credit card dues. For the categories specified by the government, the waiver on interest will be irrespective of whether the borrower has availed of the moratorium.

  8. The government's decision marked a shift from its earlier stance to say no to any interest waiver as it would affect banks.

  9. The RBI had granted borrowers an option to delay their EMIs for six months, till August 31, as the coronavirus pandemic-related restrictions pushed the economy into a record 23.9 per cent crash.

  10. The centre and the RBI have already told the top court that the moratorium can be extended by up to two years.