The Indian Banks’ Association on Friday created a robust case for getaway of the Supreme Court order that restrained banks from classifying accounts as NPA. Senior counsel Harish Salve, appearing for IBA, vehemently urged a Bench led by justice Ashok Bhushan to vacate its order of September 3 that directed banks against declaring loan accounts that have been not NPAs prior to August 31.
Solicitor common Tushar Mehta, appearing for the Centre, urged the apex court not to delve into the challenge of sector-precise loan repayment reliefs and the challenge really should be left to be resolved involving lender banks and borrowers. The apex court had final week asked RBI to respond to the energy producers’ demands for many rewards, which includes restructuring of their loans, below the current central bank circular on debt recast.
Banks are losing funds every day due to these restrictions and the exact same really should be lifted as the need to have for such protection no longer existed, he argued, adding that “banks are rendered helpless against defaulting borrowers”, Salve contended.
The Bench also comprising justices R Subhash Reddy and MR Shah, having said that, mentioned that it will hear the case, which includes IBA’s plea, on December 2.
The energy sector had asked the major court to direct the Union government to instruct lending institutions to not charge interest on interest accrued throughout the moratorium period. Since the compound interest relief unveiled by the government is only for loans up to Rs 2 crore, energy corporations have hardly benefited. The Association of Power Producers had argued that “the sector being an essential and abused segment just needs tweaking of the RBI circular to make it inclusionary so that the sector could avail the benefits of the scheme”, senior counsel AM Singhvi had argued, adding that the energy sector NPAs have been the outcome of non-payment customers (discoms). Stating that the creating corporations, which are suffering the most, he mentioned the total debt had risen to Rs 1.2 lakh crore.
Meanwhile, the SC disposed of many petitions filed by person borrowers who had expressed their satisfaction on the measures taken by the Centre to redress their grievances, which includes waiver of interest on loan instalments. It also asked the government and banks to implement all relief measures that had currently been announced by the finance ministry vide its circular of October 23, 2020. It directed the government and the RBI “to ensure that all steps be taken to implement the decision … so that benefit as contemplated by the GoI percolates to those for whom the financial benefits have been envisaged and extended”.
Senior advocate Kapil Sibal for Credai (Maharashtra) argued that the Centre, RBI as effectively as the bankers’ association had mentioned that anything required to be worked out in accordance with the contract. “This means disaster or no disaster contractual provisions will prevail. The position is that contractual provisions will prevail with or without Covid. As on September 1, 98% of the industry will become NPA. These are figures of the government. If court does not protect us, we will not be entitled to any relief,” he contended.
The Centre in October mentioned that it would waive compound interest on the repayment of loans of up to Rs 2 crore in some categories, a move that would present relief to person and MSME borrowers.
The apex court is hearing a batch of petitions by many market bodies, such as Association of Power Producers, many chapters of Credai and Shopping Centres’ Association of India, and so on. The petitions are searching for market-precise reliefs in repaying loans in the wake of coronavirus pandemic.