Loans: SC questions Centre, RBI on panel report implementation

Bench notes that additional affidavit filed by govt late last week did not address “several issues” raised in pleas highlighting borrowers’ plight

A view of the Supreme Court of India building in New Delhi. File

The Supreme Court on Monday asked the Union government and the Reserve Bank of India (RBI) about the steps taken to implement the K.V. Kamath Committee report on recommendations to bail out sectors affected by the COVID-19 stress.

A Bench led by Justice Ashok Bhushan noted that an additional affidavit filed by the government late last week did not address “several issues” raised in writ petitions highlighting the plight of borrowers, small and big, who were being charged compound interest, post the pandemic moratorium, which expired on August 31.

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‘Hand-hold’ small borrowers 

The additional affidavit informed the Supreme Court about the government’s decision to “hand-hold” small and vulnerable borrowers and waive the compound interest (interest on interest) accumulated against their loans during the six-month moratorium period. But the waiver of compound interest is only applicable for loans up to ₹2 crore, the Ministry of Finance told the court.

The waiver will be for MSME, education, housing, consumer durables, credit card, auto, personal and consumption loans, all up to ₹2 crore. But the court recorded in the order submissions made that the government and the RBI were yet to issue notifications or circulars to implement the waiver.

During the hearing, the court went on to ask the government whether it had so far issued any circulars, policy decisions and so on, based on the Kamath panel report , which has made suggestions for a loan resolution or restructuring scheme for 26 pandemic-distressed sectors.

‘Real estate left out’

Senior advocate Aryama Sundaram said the real estate sector had been completely left out.

The court said the government and the RBI had brought nothing on record to show what been done to implement the Kamath panel report. At one point, Justice Bhushan asked why the report itself had not been placed on record in the court.

“We have nothing to hide. We will put it on record. It [report] is available in the public domain,” Solicitor General Tushar Mehta, appearing for both the government and the RBI, replied.

Senior advocate V. Giri, also for the RBI, said the government was deliberating on further improvements in the loan resolution plans. Charging of compound interest post moratorium had hit hard the ordinary person, he acknowledged.

He assured the court that the report would be placed on record.

‘Issue circulars’

 The court said it was not just about placing the report on record, but implementing it. The RBI and the government should issue circulars so that people knew what benefits had been extended to them.

“It will be done,” the government and RBI sides responded.

“When will it be done... This has been going on for long. There is need for a proper restructuring scheme,” Justice M.R. Shah, on the Bench, said.

The court found there was no resolution or policy decision, by individual banks, on the manner in which they should implement the various decisions taken by the Centre and the RBI. 

Salve seeks time

Senior advocate Harish Salve, for the Indian Banks’ Association, sought time to place on record the individual policy decisions of each bank. “Whatever the relief, the weight of it will fall on the banks”, he said.

 Justice Shah observed said, “We are trying to strike a balance here”.

The court allowed the parties to file their replies to the additional affidavit in a week. The Centre has to place on record the Kamath panel report along with circulars, policy decisions, if any, on the issue.

The court scheduled the next hearing on October 13.