In an affidavit before the Supreme Court, the Reserve Bank of India has said it would not be possible to grant more time as a relief for sectors hit by the coronavirus pandemic. In the affidavit, the RBI and the Centre have said the expert committee recommendations have already looked into sector-specific conditions for loan repayment. Directions have been given to banks and financial institutions to restructure loans as needed, the affidavit read.
“Resolution Framework issued by the Reserve Bank on August 6, 2020, is aimed at facilitating the revival of real sector activities and mitigating the impact on the ultimate borrowers, which are under financial stress caused by economic fallout on account of Covid-19 pandemic. In terms of the Resolution Framework, only those borrower accounts shall be eligible for a resolution which were classified as standard, but not in default for more than 30 days with any lending institution as on March 1, 2020,” the RBI stated in the fresh affidavit.
In the loan moratorium case, the Central government had earlier said the policy decisions were the domain of the executive government and the court should not go into the issue of sector-specific reliefs.
The Union government also said that sufficient leeway has already been provided to accommodate the impact of COVID-19 on sectors while stipulating specific ratios.
Earlier on October 2, the Finance Ministry had filed an additional affidavit, stating the ministry has decided to waive compound interest (interest on interest) charged on loans of up to Rs 2 crores for a six-month moratorium period announced due to the pandemic from individual borrowers as well as medium and small industries.
On Monday, Supreme Court said the Centre’s response did not contain “necessary details” and asked it and the RBI to place on record the KV Kamath committee recommendations on debt restructuring in view of COVID-19 related stress on various sectors as well as the notifications and circulars issued so far on loan moratorium.