The Supreme Court today adjourned a hearing in the matter of waiving “interest on interest” on loans up to ₹ 2 crore, frozen during a six-month moratorium granted because of the coronavirus crisis, to Wednesday. The top court was due to hear the matter on Tuesday on a waiver of interest on deferred EMIs – or interest on interest – to help small borrowers during the coronavirus pandemic, after it told the government last week that its affidavit “fails to deal with several issues raised by petitioners” and asked for more details from the RBI and centre on their plan to help the borrowers.
The outcome of the case could have far-reaching consequences not only for millions of borrowers, but also for banks.
The government has already told the court it would waive the compound interest on loans up to ₹ 2 crore under a COVID-19 support plan, in a move that will bring relief to millions of borrowers. It has also said it would not be possible to further supplement the already-announced relief packages, requesting the court not to permit any further judicial review by the petitioners.
Last week, the Reserve Bank of India appealed to the top court to let banks classify loans as non-performing assets – or bad loans – saying a ban imposed to help borrowers in the COVID-19 pandemic could greatly harm the country’s financial system.
In a filing to the Supreme Court late on Friday, the RBI warned that failure to immediately lift an interim stay on banks classifying any loan as a non-performing asset would also undermine the central bank’s regulatory mandate.