Govt Says No More Loan Moratorium; SC Asks Why Credit Card Users Got Refund?

Govt Says No More Loan Moratorium; SC Asks Why Credit Card Users Got Refund?
Govt Says No More Loan Moratorium; SC Asks Why Credit Card Users Got Refund?

On Thursday, the top court asked the Central government, why credit-card users should be entitled to the benefit of compound interest waiver under Reserve Bank of India’s (RBI) loan moratorium scheme.

Moratorium Scheme Not Applicable To Credit Card Borrowers

According to the Supreme court, they are not availing loans but only using the card to purchase goods.

The question was raised when the Solicitor General told the court that credit card users would also receive ex-gratia payments.

Here Solicitor General, Tushar Mehta, representing the Central government for the hearing.

The Bench of Justices Ashok Bhushan, R Subhash Reddy and MR Shah was hearing a batch of petitions.

It was related to charging interest on interest for borrowers who availed of the RBI’s loan moratorium scheme, which was introduced in view of the COVID-19 pandemic.

What About Pre-COVID Defaulters?

Further, Mr Mehta informed that Rs 5270 crore has been credited to 13.12 crore accounts in the interest waiver plan.

Prior to this, the Centre has subsidized compound interest for a 6-month moratorium for all loans up to Rs 2 crore.

Mehta submitted that the government is on top of the matter and it is taking all the necessary steps before a bench headed by Justice Ashok Bhushan.

He also mentioned the pre-COVID defaulters, as they cannot benefit from a fresh resolution framework and the committee for resolution framework for COVID-related stress has assessed various sectors.

According to Mehta, the IBC process has already been suspended since March to stop companies from slipping into bankruptcy. 

He submitted that ” Will ensure that those who paid during moratorium are not short-changed”.

No Further Relief To The Borrowers

During the hearing, the Centre requested the court to not to consider further relief to the borrowers.

He also quoted the Kamath Committee’s report on restructuring of big loans.

He submitted that a separate mechanism for restructuring small loans by lending institutions is already there.

When the bench queried about the Kamath committee’s recommendations if not meant for big borrowers? 

He clarified saying that it was meant for big borrowers applicable to lending greater than Rs 1,500 crore. 

The court hearing for this matter will continue next week.

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