India

On Loan Moratorium And Interest Payments, Centre's October 1 Deadline

On Loan Moratorium And Interest Payments, Centre's October 1 Deadline

In March, the RBI had granted a 3-month moratorium on loans due to coronavirus (Representational)

New Delhi: The Centre has to take a call by October 1 on how much time it will give to borrowers who have not been able to pay back loans due to the coronavirus pandemic. It also has to decide whether they have to pay interest for this period, the Supreme Court said today. It got a week's time from the Supreme Court today, by the end of which it has to spell out the way ahead on an extension of moratorium, waiving of interest, sector-wise relief and its decision on the recommendations of Mehrishi Committee, which was asked to gauge the impact of interest waiver during the Covid-linked moratorium.

Here are the 10 points on loan moratorium deadline:

  1. Today, at the end of a two-week extension, the Centre asked for more time, saying the decision on this "is at an advanced state". The court has given it another week - the next hearing will be on October 5.

  2. The government, however, has to file an affidavit by October 1 to spell out its stand, ordered the three-judge bench of justices Ashok Bhushan, R Subhash Reddy and MR Shah.

  3. In March, the Reserve Bank of India had granted a three-month moratorium on loans due to the covid pandemic. It was later extended it till August 31.

  4. But early in September, the Supreme Court, in response to petitions, asked the government to chart out a course to help borrowers who have not been able to make payments. The petitions had sought waiver of interest for the six-month moratorium period.

  5. "We are giving time to the Centre, but take a concrete decision," the judges had said at a hearing on September 10, making it clear that the government needs to chart its own course and not "hide behind the Reserve Bank".

  6. The court had also said that loan accounts of borrowers choosing to defer loan repayment will not be declared as bad loans till further orders.

  7. The Centre and the Reserve Bank of India have told the court that the loan moratorium can be extended by up to two years on account of the coronavirus-related situation. But there is no clarity on the interest-related situation yet.

  8. The Centre had earlier told the court that waiver of interest on deferred EMIs during moratorium period would be against "the basic canons of finance" and unfair to those who repaid loans as per schedule. The Reserve Bank, however, has come out with a scheme which provides for extension of moratorium for two years to borrowers facing financial constraints.

  9. In September, the government set up a panel to look into the issue of interest being charged by banks on the deferred instalments. The three-member committee, under former Comptroller and Auditor General Rajiv Mehrishi, will make an overall assessment to help the government make informed decision.

  10. The Mehrishi Committee was to measure the impact of coronavirus-related restrictions on economy and the prospect of waiving interest on interest. It was also told to come up with suggestions to help various sections of society and submit its report within a week.