The government on Friday informed the Supreme Court that "it's not possible to give more relief to different sectors" amid the novel coronavirus pandemic, stressing that the "courts should not interfere in fiscal policy". The centre's response came days after the top court said the government's last week's affidavit on waiving "interest on interest" on loans of up to Rs 2 crore - frozen by the Reserve Bank of India (RBI) in a six-month moratorium granted because of the coronavirus pandemic - was "not satisfactory".
In its latest affidavit, the government has said: "Policy is the domain of the government and court should not go into sector-specific financial relief. Any further relief, besides waiving of compound interest for loans up to Rs 2 crore, is detrimental to the national economy and banking sector."
Last week, the government told the top court that it was ready to waive interest on the repayment of loans of up to Rs 2 crore. The interest waiver is applicable for loans taken by MSMEs (Micro, Small and Medium Enterprises), for educational, housing, consumer goods and auto loans and for credit card dues.
On Monday, however, the top court said the centre's affidavit was not satisfactory and asked for a do-over in a week. While hearing petitions on a waiver of interest on deferred EMIs - or interest on interest - to help small borrowers during the coronavirus pandemic, the top court said the centre's affidavit "fails to deal with several issues raised by petitioners".
The government was asked to consider the concerns of the real estate and power producers in fresh affidavits.
In the fresh affidavit, however, the government said that "relief for specific sectors cannot be demanded through petitions".
"Only solution is lending institutions and their borrowers formulate restructuring plans... and centre, and RBI cannot interfere," the affidavit reads, which further underlines that "as per Kamat Committee report it is it is not possible to arrive at one particular formula for sector specific relief to deal with pandemic".
Banks will have to implement the compound interest waiver within one month from the date of notification, the government has said.
Meanwhile, the RBI has told the top court the "extension of loan moratorium should be left to banks to decide as per policy". "Longer moratorium can raise risk of delinquencies after scheduled payments resume," the central bank has said in a separate affidavit.
The Supreme Court will hear the case again on Tuesday (October 13).