The Supreme Court today said the centre’s affidavit on waiving “interest on interest” on loans up to Rs 2 crore, frozen during a six-month moratorium granted because of the coronavirus crisis, was not satisfactory and asked for a fresh version in a week. The affidavit “fails to deal with several issues raised by petitioners,” the court said. The central government has been asked to consider the concerns of the real estate and power producers. The Supreme Court also noted that “no consequential orders or circulars” were issued by the government or the RBI on enforcing the centre’s decisions.
The case has been adjourned till October 13, as real estate developers have sought a few days to respond to the government’s plan to waive compound interest on loan repayments.
On Friday, the centre had told the top court in its affidavit that it would waive the compound interest component on small businesses and some other loans related to education and housing, and credit card dues, to help borrowers.
“A lot of facts and figures in the government’s affidavit are without any basis,” realty industry body CREDAI’s counsel, Kapil Sibal, told the top court, seeking few days to reply to the government’s affidavit explaining its stance.
Senior counsel Aryama Sundaram, appearing for real estate developers, told the Supreme Court that the finance ministry’s estimate that waiving off interest on loans to every category would cost banks Rs 6 lakh crore. The CREDAI or Confederation of Real Estate Developers’ Associations of India, the top association of private real estate developers in the country, is among a number of representations from different sectors involved in the case.
According to the government’s filing, submitted to the top court on Friday, the interest waiver will apply for loans taken by micro, small and medium enterprises (MSMEs) for educational, housing, consumer goods and auto loans, and for credit card dues.
For the categories specified by the government, the waiver on interest will be irrespective of whether the borrower has availed of the moratorium.
The government’s decision on Friday, based on recommendation of a government panel headed by former Comptroller and Auditor General Rajiv Mehrishi, marks a shift from its earlier decision to say no to any interest waiver as it would affect banks.
A batch of petitioners in the case had sought a waiver of interest on deferred EMIs – or interest on interest – during the six-month moratorium period granted by the Reserve Bank of India on account of the coronavirus pandemic.
The RBI had granted borrowers an option to delay their EMIs for six months, till August 31, as the coronavirus pandemic-related restrictions pushed the economy into a record 23.9 per cent crash.
The centre and the RBI have already told the top court that the moratorium can be extended by up to two years.