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Supreme Court on Thursday offered a shield on loan accounts for two months, those which have not been declared non-performing assets (NPA) as on August31.
This instruction came during hearing of plea for waiver of interest rate on moratorium of loan repayment by a bench of three-judge — Justices Ashok Bhushan, R Subhash Reddy and MR Shah. The hearing will resume on September 10.
Reserve Bank of India had allowed moratorium for a period of six months ending on August 31. This means borrowers such as home loan or auto loan were allowed to defer six EMIs (Equated Monthly Instalments).
However, banks said borrowers opting the deferment will have to pay more. SBI posted on its website that for a home loan of ₹30 lakh with a remaining maturity of 15 years the additional interest payable would be ₹4.54 lakh almost equal to an additional 16 EMIs. This means interest on interest.
The Bench is also going into the question of interest to be charged on interest as well as the powers of the Centre and the NDMA (National Disaster Management Authority) under the Disaster Management Act to provide relief on aspect of loan repayment during pandemic.
During Thursday’s hearing, the bench made it clear that it has no intention to deal with the August 6 circular. The circular is not being challenged but the relief is being sought. Question is about the demands of compound interest in the meantime. Moratorium and penal interest cannot go together. RBI will have to clarify, it said.
Rules say if three EMIs not paid, then particular loan account will become NPA (Non-Performing Assets).
The Bench sought clarification on this issue and asked should this be recorded in its order. Senior lawyer Harish Salve, representing Indian Banks Association, said this Moratorium is not included in the default period. After moratorium is over, then default period of 90 days will start. There is no concession, he said.
The Bench took submission by Salve and Solicitor General on record and said, “accounts not declared NPAs till August 31 not to be declared NPAs till further orders”.
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