The Centre on Friday told the Supreme Court that "it's not possible to give more relief to different sectors" amid the novel coronavirus pandemic, stressing that the "courts should not interfere in fiscal policy". It would not be possible to add to the already announced financial relief packages and waive compound interest for the six-month loan repayment moratorium period, the Centre informed the apex court.
In its latest affidavit, the government has said: "Policy is the domain of the government and court should not go into sector-specific financial relief. Any further relief, besides waiving of compound interest for loans up to Rs 2 crore, is detrimental to the national economy and banking sector."
In the fresh affidavit filed in the top court, which is hearing a plea that raises the question of charging of interest on interest for loan repayments during the moratorium period, the RBI said “a long moratorium exceeding six months can also impact credit behaviour of borrowers and increase the risks of delinquencies post resumption of scheduled payments. It may result in vitiating the overall credit discipline which will have a debilitating impact on the process of credit creation in the economy. It will be the small borrowers which may end up bearing the brunt of the impact as their access to formal lending channels is critically dependent on the credit culture”.
The Centre's response came days after the top court said the government's last week's affidavit on waiving "interest on interest" on loans of up to Rs 2 crore—frozen by the RBI in a six-month moratorium granted because of the coronavirus pandemic—was "not satisfactory". It had also asked the Centre to bring on record the Kamath Committee report, which considered restructuring of loans taken by big borrowers.
In response, the Centre said it has already announced a financial package of Rs 21.7 lakh crore under Garib Kalyan and Atma Nirbhar packages that covered several sectors. In reply to the SC's query as to why these decisions are not notified yet, the ministry said, "The decisions can mature into an office memorandum/circular/order after following m ..
The fresh affidavit by the RBI said “continuation of temporary moratorium” beyond the six month period already allowed “would not even be in the interest of borrowers. It may not be sufficient in addressing deeper cash flow problems of the borrowers and in fact exacerbate the repayment pressures for the borrowers”.
The Supreme Court will hear the case again on Tuesday (October 13).
