SC directs Centre and RBI to put K V Kamath panel's recommendations on record
The Supreme Court has asked the Centre and the Reserve Bank of India (RBI) to place on record the KV Kamath committee's recommendations on Covid-19-related debt restructuring, in the ongoing case related to the interest waiver on loans during the moratorium period.
The government and the RBI would submit additional affidavits suggesting steps to bring into shape the recommendations made on waiver of compound interest for small borrowers. The Court has adjourned the hearing until October 13.
The RBI had appointed an expert committee, led by K V Kamath, to frame a resolution framework on stressed loans. The committee in its report, outlined parameters for banks to deal with 26 sectors affected by Covid-19.
A Bench comprising Justices Ashok Bhushan, R Subhash Reddy, and M R Shah asked the RBI and the Centre to respond to concerns raised by power producers and real estate associations who are also petitioners in the case. The Indian Banks' Association has also been called in to give its views on the central government's latest stance on the waiver of compound interest.
The Supreme Court was hearing the case after the Finance Ministry submitted an affidavit stating that it is ready to bear the burden of waiving compound interest for small borrowers. Any individual or entity whose loan amount is less than Rs. 2 crore, irrespective of whether they have availed of loan repayment moratorium or not, will be eligible for the waiver of compounding of interest, it said. This will be for repayment dues pending between March and August, 2020.
The Confederation of Real Estate Developers' Association represented by Senior advocate Kapil Sibal, sought additional time from the Court to respond to the Centre's affidavit on the waiver of compound interest. It also added that the figures mentioned in it were "without any basis". The central government had said in its affidavit that a waiver of interest on all loans during the moratorium period would cost Rs. 6 trillion, rendering most banks unviable.
Senior advocate Aryama Sundaram argued that the concerns of power producers and the real estate sector had not been taken into account in the Centre's affidavit on loan waiver. He even said that the sectors will not benefit from the loan restructuring scheme formulated by the RBI.
During the brief hearing, the Bench said it was considering everything as the "balance" had to be struck between the needs of the banks and the borrowers, and sought the IBA's response on the Centre's decision. "Ok, we will grant time to file a reply to the affidavit. We are considering everything. A balance has to be struck. You also reply to the stand of the individual bank," it said.
On being asked as to how and when banks would implement the plan, senior advocate Harish Salve, appearing for the IBA, said once the RBI issued a circular on the issue, banks would do the needful within 24 hours.
Senior lawyer V Giri, appearing for the RBI, said the government had taken a decision at the "highest level to handhold small borrowers" and had held deliberations on aspects of reliefs to various sets of borrowers.
Solicitor General Tushar Mehta, appearing for the Centre, said the government had taken a decision after taking a holistic view of the entire situation.
He said the government would be placing the Kamath committee recommendations on record.
The Supreme Court is hearing a petition filed by an Agra resident, Gajendra Sharma, who demanded a waiver of interest charged by banks on the instalments that have been deferred for repayment by the RBI through a six-month moratorium imposed in March. A number of industrial bodies have joined the cause with the original petition demanding waiver of interest, or waiver of interest on interest on the suspended monthly instalments.