Declining to extend the six months loan moratorium period, the Supreme Court on Tuesday refused to interfere with the government and the Reserve Bank of India's loan moratorium policy.
The Apex court said that instead of refunding the amount collected as a compound interest to the borrower, it shall be adjusted to the next payable instalment, reported Bar and Bench.
"We are of the opinion that during the moratorium period there shall be no interest on interest or compound interest or penal interest and any amount already recovered under those heads shall be refunded by adjusting it in the next instalment of the loan amount," said the court in its judgement.
This ruling of the Supreme Court came as it was hearing a batch of pleas by various trade associations which included real estate and power sectors. These sectors were seeking an extension of the loan moratorium and other reliefs in view of the COVID-19 pandemic.
The six months-long moratorium period, which was earlier announced by the Reserve Bank of India, ended last year on August 31, but the top court's order had restrained the banks from declaring any more accounts as NPAs. The RBI and the Union Finance Ministry, however, were opposing the extension of the moratorium period.
The borrowers were demanding many things which included a total waiver of the interest during the moratorium period, an extension of the moratorium period, sector-wise reliefs provided by RBI, an extension of the period for invocation of resolution mechanism, but everything was rejected by the Supreme Court, reported Times Now.
Further in its judgement, the top court said, "Due to COVID, the government also suffered financially and they cannot be asked to declare a particular policy. If any financial package or policy is to be declared, that will only be decided by the Central government and RBI's detailed discussion over the matter. In such matters of policy, where only some sectors are not satisfied, the court cannot intervene."
"Whether a policy is fit or not and if a different fairer approach could have been adopted, these are not within judicial domain," said the court.
After the Supreme Court verdict was out, there were gains in the banking stocks. The stocks were up between 2% and 2.5% of SBI, IndusInd Bank, ICICI Bank, Axis Bank and HDFC Bank.