Center tells Supreme Court not to interfere in fiscal policy

The Central government on Ocotber 9 informed the Supreme Court that “it’s not possible to give more relief to different sector” amid the novel coronavirus pandemic, stressing that “courts should not interfere in fiscal policy”.

The centre’s response came days after the top court 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”.

In its fresh affidavit, the Reserve Bank of India (RBI) has told Supreme Court, “Resolution Framework issued by the Reserve Bank on August 6, 2020 is aimed at facilitating revival of real sector activities and mitigating the impact on the ultimate borrowers, which are under financial stress caused by economic fallout on account of Covid-19 pandemic. In terms of the Resolution Framework, only those borrower accounts shall be eligible for resolution which were classified as standard, but not in default for more than 30 days with any lending institution as on March 1, 2020.”

On October 12, however, the top court said the centre’s affidavit was not satisfactory and asked for a do-over 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 government was asked to consider the concerns of the real estate and power producers in fresh affidavits.
In the fresh affidavit, however, the government said that “relief for specific sectors cannot be demanded through petitions”.

Only solution is lending institutions and their borrowers formulate restructuring plans… and centre, and RBI cannot interfere,” the affidavit reads, which further underlines that “as per Kamat Committee report it is it is not possible to arrive at one particular formula for sector specific relief to deal with pandemic”.

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 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).