The government told the Supreme Court, last week, that it was ready to waive interest on the repayment of loans of up to ₹ 2 crores.
On Friday, the government informed the Supreme Court that "it's not possible to give more relief to different sectors" amid the novel coronavirus pandemic, stressing on "courts should not interfere in fiscal policy". This response from the Centre came days after the Supreme Court said that the government's last week's affidavit on waiving "interest on interest" was "not satisfactory".
In the government's latest affidavit, it said that "Policy is the domain of the government and court should not go into sector-specific financial relief. Any further relief, besides waiving of compound interest for loans up to ₹ 2 crores, is detrimental to the national economy and banking sector."
As per the government's last week's affidavit, it was ready to waive interest on the repayment of loans of up to ₹ 2 crore, which is applicable for loans taken by MSMEs (Micro, Small and Medium Enterprises), for educational, housing, consumer goods, and auto loans and for credit card dues.
Reconsideration by the Supreme Court
The Supreme Court was not satisfied with the Centre's affidavit and on Monday, asked for a re-do in a week. While hearing petitions on a waiver of interest on deferred EMIs - or interest on interest - to help small borrowers during the coronavirus pandemic, the top court said the Centre's affidavit "fails to deal with several issues raised by petitioners".
The Supreme Court asked the government to consider the concerns of the real estate and power producers in fresh affidavits, to which the government said in a fresh affidavit that, "relief for specific sectors cannot be demanded through petitions".
Banks will have to implement the compound interest waiver within one month from the date of notification, the government has said.
Meanwhile, the RBI has told the top court the "extension of loan moratorium should be left to banks to decide as per policy". "Longer moratorium can raise the risk of delinquencies after scheduled payments resume," the central bank has said in a separate affidavit.
The Supreme Court will hear the case again on Tuesday (October 13).