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Loan moratorium case: Not possible to waive complete interest on loans, says SC

23-03-2021

The Supreme Court on Tuesday refused to interfere with the government and the Reserve Bank of India's (RBI) loan moratorium policy and declined to extend the six months loan moratorium period. The apex court said that the waiver of complete interest is not possible as it affects depositors and lenders. Banking stocks extended gains after the Supreme Court verdict was out. SBI, IndusInd Bank, ICICI Bank, Axis Bank and HDFC Bank were up between 2% and 2.5%. Nifty Bank, the banking sub-index of NSE was up 0.53% compared to 0.05% gain in the benchmark Nifty. The SC was pronouncing its verdict on a batch of pleas by various trade associations, including from real estate and power sectors, seeking an extension of loan moratorium and other reliefs in view of the COVID-19 pandemic. The 6-month loan moratorium period announced by the Reserve Bank of India (RBI) had ended on August 31 last year, but the top court had restrained banks from declaring any more accounts as NPAs. While the Union Finance Ministry and the RBI were opposing any extension to the period, many financially sick sectors were hopeful of some relief.

The top court also rejected demands for extension of moratorium period. But it said that the government and the Reserve Bank of India may grant sector-specific relief. The SC further noted that the government also suffered financially due to Covid and they can not be asked to declare a particular policy. It said that any financial package or policy, if it is to be declared, will be decided by the Centre and RBI after detailed consultations. "Only if some sectors are not satisfied Court cannot intervene in such matters of policy," the SC said. "It has been held that it's neither within judicial domain on whether a policy is fit or if a different fairer approach could have been adopted."