Centre informs Supreme Court to “not interfere in fiscal policy”

10th October 2020

10th October 2020

In response to the Supreme Court, the government informed on Friday that due to the ongoing coronavirus pandemic, it's not possible to give more relief to different sectors" and also stressed on the fact that "courts should not interfere in fiscal policy."

This response from the government came days after the statement of the apex court which said the government's last week's affidavit on waiving "interest on interest" on loans of up to ₹ 2 crore - frozen by the Reserve Bank of India (RBI) in a six-month moratorium granted because of the coronavirus pandemic - was "not satisfactory".

"Policy is the domain of the government and the court should not go into sector-specific financial relief. Any further relief, besides waiving of compound interest for loans up to ₹ 2 crore, is detrimental to the national economy and banking sector," said the government in its latest affidavit.

The government had informed the Supreme Court last week about its decision to not charge any interest on the loans' repayment of up to  ₹2 crore. And this waiver was applicable for loans provided to MSMEs (Micro, Small and Medium Enterprises), for housing, educational, auto loans, credit card dues, and consumer goods.

However, the apex court on Monday said that the affidavit provided by the centre was not satisfactory and asked to revise that in a week.

The Supreme Court said that the government's affidavit "fails to deal with several issues raised by petitioners" while it heard the petitions on waiving loans' interest taken by small borrowers.

The top court asked the government to submit a fresh affidavit with the mention of concerns of the power producers and real estate.

The centre, in its fresh affidavit, said, "relief for specific sectors cannot be demanded through petitions."

The affidavit reads, "Only solution is lending institutions and their borrowers formulate restructuring plans... and centre, and RBI cannot interfere." It further highlighted, "as per Kamat Committee report it is not possible to arrive at one particular formula for sector-specific relief to deal with pandemic".

The government said banks will have to implement the compound interest waiver within one month from the date of notification, the government has said.

In a separate affidavit, the Reserve Bank of India (RBI) said to the apex court that "extension of loan moratorium should be left to banks to decide as per policy." It further stated that "longer moratorium can raise risk of delinquencies after scheduled payments resume."

The next date for the hearing of the case is October 13.

 

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