The Supreme Court adjourned its hearing on Thursday to November 18 in the case relating to a loan relief program for borrowers to help them weather the coronavirus pandemic. The Supreme Court agreed to postpone the hearing after the center informed the court that the Solicitor General was making arguments in the Central Vista case before another Supreme Court bench. The highest court has asked lawyers for all parties to prepare a short note and submit it to the court before the next hearing.
The highest court hears a series of petitions regarding the collection of interest on interest – or compound interest – by banks on IMEs delayed by borrowers for the period from March 31 to August 31 as part of a program RBI approved that would bring relief to millions of people.
The main petitioner, Gajendra Sharma, thanked the court, the government and the solicitor general for helping small borrowers and holding their hands.
The RBI has asked banks and other financial institutions to credit the difference between compound interest and simple interest on qualifying loan repayments up to 2 crore rupees due between March and August by November 5.
Loan relief covers personal loans, housing, education, automobiles and consumer durables, loans to micro, small and medium enterprises (MSMEs), in addition to loans to micro, small and medium business (MSME) and credit card dues, subject to applicable conditions. .
Lenders will credit the amount regardless of whether the borrower has fully or partially opted for relief. They will have to claim the reimbursement before December 15th.
The government has decided to cover the cost of the program, estimated at Rs 6,500 crore.
The amount – the difference between compound interest and simple interest for the six-month period – paid by lenders on qualifying loans will be repaid by the government at a later date.
The highest court had previously ordered the government to provide loan relief to eligible borrowers “as soon as possible”, saying any delay in its implementation was not in the common man’s interest. Urging the government to provide loan relief as soon as possible, the court said, “The common man’s Diwali is now in the hands of the government” and asked the government to come up with modalities on the issue.
The government was forced to rethink its loan relief program after the RBI allowed borrowers to defer payments due between March and August, but also allowed banks to charge interest on these delays. This meant that the borrower would be able to pay later, but at an additional cost.
Initially, the RBI issued the circular on March 27 which authorized credit institutions to grant a moratorium on the payment of maturities of term loans due between March 1, 2020 and May 31, 2020, due to the pandemic. Later, the moratorium period was extended until August 31 of this year.