The Supreme Court Monday asked the Centre and the Reserve Bank of India (RBI) to place on record the K V Kamath committee recommendation on debt restructuring due to COVID-19 related stress on various sectors as also the notifications and circulars issued by them so far on the issue of loan moratorium. The apex court's direction came after the Finance Ministry decided to grant relief to individual borrowers as well as medium and small industries by agreeing to waive compound interest (interest on interest) charged on loans of up to Rs 2 crores for a six-month moratorium period announced due to the pandemic.

A bench comprising Justices Ashok Bhushan, R Subhash Reddy and M R Shah took up the pleas alleging that banks have decided to charge interest on the EMIs which have not been paid by the borrowers from March one to August 31 after taking benefit of the loan moratorium scheme of the Reserve Bank of India (RBI).

In the hearing conducted through video conferencing, the top court took note of the grievances that various sectors such as real estate have been left out under the new proposal by the Centre.

The Kamath panel had made recommendations for 26 sectors that could be factored by lending institutions while finalizing loan resolution plans and had said that banks could adopt a graded approach based on the severity of the coronavirus pandemic in a sector.

The apex court has asked the Centre and the RBI to place before it within a week the recommendations and the decisions and other notifications on loan moratorium and also "consider the issues raised by the real estate associations and the power producers".

Meanwhile, Indian Banks Association (IBA), Confederation of Real Estate Developers Association(CREDAI) and other parties have been granted liberty by the bench to file their responses to the affidavit of the Centre.

Senior advocate C A Sundaram, appearing for the real estate sector, said it has been completely left out which should not have been done "in this kind of scenario".

Another senior lawyer Kapil Sibal said that he wanted to file a detailed affidavit to the Centre's reply as there are certain facts which need to be dealt with and sought time for it.

The government, in its affidavit, had said that it will seek due authorisation from Parliament for making appropriate grants in this regard and "the endeavour shall be over and above the support of Rs 3.7 lakh crore to MSMEs, Rs 70,000 crore for home loans etc. already extended through the Garib Kalyan and Aatma Nirbhar packages announced by the government earlier".

It had said that the relief to all borrowers in respect of compounding of interest during the period of the moratorium would be admissible to the categories specified irrespective of whether the borrowers had availed the moratorium or not.

Initially, the RBI on March 27 had issued the circular which allowed lending institutions to grant a moratorium on payment of instalments of term loans falling due between March 1, 2020 and May 31 this year due to the pandemic.

Later, the period of the moratorium was extended until August 31.

Here are the main highlights from the Supreme Court's hearing in the loan moratorium and interest waiver case today:

SC order: All affidavits to be filed by Oct 12; Next hearing on Oct 13.

SC order: Time allowed for the filing of an additional affidavit on any policy decision, implementation. Govt, RBI also directed to respond to concerns raised by CREDAI, power producers.

SC Order On #InterestWaiver Case | Time allowed for filing of additional affidavit on any policy decision, implementation. Govt, RBI directed to respond to concerns raised by CREDAI, Power Producers pic.twitter.com/y2E35ixHHZ

— CNBC-TV18 (@CNBCTV18Live) October 5, 2020

SC order: The government has filed an affidavit, No consequential orders, circulars have been issued by the government to RBI to enforce the decisions. Kamat Committee recommendations are also not placed before us. RBI is to make public the recommendations that have been accepted, must be shared.

Kapil Sibal for Credai to SC: Another expert panel was formed—Maheshwari Committee. Details of the Maheshwari Committee, recommendations have also not been placed on record.

SC observes: Place on record Kamat Comm Recos, additional decisions if any.

Salve for Banks: Govt has a two-pronged approach. Govt has allowed relief to small borrowers by fiscal support for interest on interest. Kamat Committee recommendations take care of sectoral issues.

Harish Salve for Banks: Our accounting frozen because the Supreme Court has restrained us from the classification of accounts as NPAs. Will need 48 hours to get back to SC on the Govt proposal.

VV Giri for RBI to SC: At the highest level decisions have been taken. Govt has assured handholding to small borrowers with respect to interest on interest. This will also require statutory amendment, circulars. Will take care of a large chunk of small borrowers fearing interest on interest.

SC observes: Kamat Committee recommendations, and follow up action on individual sectors has not been placed before us. Why was it not placed before us?

Solicitor General for Govt: Govt has taken a holistic view. Need to be cognizant of the fiscal limitations.

Kapil Sibal, Aryama Sundaram for Credai: Govt affidavit says nothing about relief for the real estate sector. Reliefs sought by us have not been responded to by the Centre.

Supreme Court proceedings begin as judges arrive, reports CNBC-TV18's Ashmit Kumar.

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SC to consider interest waiver case.Govt proposes paying the interest on interest for loans of up to 2cr for 6 month moratorium period.Time - 10.30amWatch this space for live updates.((Live Thread))@CNBCTV18Live pic.twitter.com/DN3GIYTiZm— Ashmit Kumar (@AshmitTejKumar) October 5, 2020

Meanwhile, in a big relief for borrowers, the Narendra Modi government told the Supreme Court that it will waive interest on the repayment of loans of up to Rs 2 crore. the finance ministry, in an affidavit submitted in the Supreme Court on Friday, said it supports the waiver of compound interest for loans under a moratorium for certain categories, three people aware of the matter told CNBC-TV18.

Here's a recap of the interest waiver case and loan moratorium issue in the Supreme Court.

Here's what to expect today in the SC hearing loan moratorium case.

Here's a recap of the Supreme Court hearing on September 10 in the interest waiver case.

—with inputs from agencies

First Published:Oct 5, 2020 10:18 AM IST