Supreme Court Rejects the Plea of Extending Moratorium Period, Says Even a Full Interest Waiver Is Not Possible

Hearing the plea of extending the loan moratorium period filed by trader associations, Supreme Court clearly stated that this period couldn’t be extended, adding that a full interest waiver is also not possible. With this verdict, Supreme Court has given relief to the banks which have suffered a huge financial loss due to the pandemic. The court said that if a bank has charged interest on loan interest for an extended period, it must be returned.

The court further stated that the government has the right to take economic decisions, Indian economy has been badly suffered due to the Covid-19 pandemic. We cannot interfere with the government policy on economic reforms. The judgment was jointly delivered by a bench of Justices Ashok Bhushan, Justice R. Subhash Reddy, and Justice MR Shah.

Earlier, in the same case, the government had given relief to the bank borrowers on EMI payments. In fact, last year during the lockdown, the country's central bank RBI had announced to offer a moratorium to lending companies from March 1 to May 31, which was extended till August 31, 2020.

Complaints on Charging Interest on Interest

With the scheme of offering a moratorium from March to August 2020, a large number of borrowers took advantage. But later disputes have arisen on banks’ interest charge on interest over the outstanding amount. The case was filed and the matter reached the Supreme Court. The court had asked for an answer from the central government on the extra interest charged on the deferred EMI. In the reply, the government waived the interest on the outstanding instalments for loans up to Rs. 2 crores.

The government's proposal for the loan up to 2 crore includes MSME loans, education loans, home loans, credit card dues, car-two wheeler loans, and personal loans. With this scheme, the entire burden of economic loss and waived loan period fell on the government, for which the government had spent around 6 thousand to 7 thousand crore rupees.

Under the Moratorium, the Borrowers Got 6 Months to Choose Not to Pay their EMIs

Under the moratorium scheme, the borrowers got 6 months to choose not to pay their EMIs against the loans they availed. But banks charged interest on the interest over the outstanding amount. The purposed scheme was brought out in order to ease the burden on borrowers during the pandemic.

Banks Were Asked Not to Declare the Loan NPA during Moratorium Period

The moratorium period was extended for another three months after waiving off EMIs payments for the first three months. During the time, RBI asked banks not to declare the loans NPA after one-time restructuring them. Under this, RBI asked banks to include only those companies and borrowers which have not defaulted for more than 30 days from March 1, 2020. Banks were also asked to bring a resolution plan by 31 December 2020 and implement it by 30 June 2021 for corporate borrowers.

  

COVID-19 Nationwide Lockdown: The Impact on Indian Economy and GDP

It does not take an economist to state that a complete 21-day social and economic lockdown of India will have a severe impact on the supply side of the economy, such as the production and distribution of goods and services, except for the essential items that are excluded.

 In an economy that is already reeling under a demand crisis, rising unemployment, a decline can be seen in manufacturing production and income. At this point of time, all of them are now occurring together for many quarters, a supply-side restraint will deliver a major blow to a large number of citizens, jeopardizing prospects for growth and social and economic well-being.

The blow to individuals and companies may have been greatly reduced but it is also struggling due to lack of foresight, preparation, and strategies. It would have saved the government too from a wild scramble.

The shutdown of planes, trains, and bus services had forced people to rush into airports, railway stations, and bus stands, allowing social distancing ridicule again. It had a different effect. Inter-state migrants have been seen walking hundreds of kilometres to their homes with women and children in tow because there was no transportation and no work.

Earlier for several daily wagers, there was no food or money to purchase the food. But for now, in Delhi, thousands of daily wagers crowd shelter homes set up by the government to provide them with food and requesting them to make social distancing once again. Business Today estimated approximately 300 million informal workers could be vulnerable and seek assistance.

The social and economic condition in India would be impacted to a great extent. All we can do is do our bit by adhering to the precautionary measures and help the government condemn the spread of this deadly pandemic. Let’s make sure that we are in this together.