Money & Banking

IBA asks Supreme Court to withdraw its NPA order

Krishnadas Rajagopal | Updated on November 27, 2020 Published on November 27, 2020

The court adjourned the case to December 2

The Supreme Court on Friday disposed of a petition filed by Gajendra Sharma in the so-called loan moratorium case, with the borrower expressing satisfaction with the government’s pay-back scheme. 

The court recorded that lending institutions have returned over ₹4,300 crore in compound interest collected from small borrowers during the moratorium period. It also noted the submission made by Solicitor-General Tushar Mehta on behalf of the government that ex gratia payments have been made into 13.12 crore bank accounts as of November 13.

A Bench led by Justice Ashok Bhushan noted in a 24-page judgment that “Mehta submits that in pursuance of circular dated October 23, 2020, the State Bank of India has informed that as on November 13, as per provisional, unaudited information received so far from various lending institutions, such lending institutions have released ex gratia amount of an aggregate exceeding ₹4,300 crore in over 13.12 crore accounts of borrowers covered under the scheme.” 

During today’s hearing, the Indian Banks Association, represented by senior advocate Harish Salve, urged the Bench to withdraw its September 3 interim order restraining banks from declaring as non-performing assets (NPAs) accounts found perfectly good till August 31. Salve said the banks are being rendered helpless against defaulting borrowers. The September 3 order had directed that “accounts which were not declared NPA till August 31, 2020 shall not be declared NPA till further orders”.

The Reserve Bank of India, represented by senior advocate V Giri, had made the same request to the court in a hearing on November 5. Giri had said the restraint order has led to “great difficulties” in the functioning of banks. The court agreed to examine the issue on December 2. 

‘Additional relief’

 Gajendra Sharma’s petition had led to the introduction of the waiver scheme as an “additional relief” to borrowers affected by the pandemic-induced financial distress.

The payments were made in compliance with the government’s pay-back scheme introduced on October 23 to waive the difference in the compound and simple interest charged between March 1 and August 31 (the moratorium period) for eight categories of loans each up to a maximum of ₹2 crore. The eight categories were MSME, education, housing, consumer durables, credit card, auto, personal and consumption loans.

 

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Published on November 27, 2020
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