Eligibility Of NBFCs On Loan Moratorium: SC Tags Plea With Matter Concerning RBI's Levy Of Interest On Loans During Moratorium

The Supreme Court on Tuesday tagged a plea seeking clarification on the eligibility of all Non Banking Financial Company's (NBFCs) for loan moratorium or whether discretion lay with banks for providing benefit with Batch matters pertaining to the issue of levy of Interest on Loans by RBI during lockdown.

A bench of Justices Ashok Bhushan, MR Shah & V. Ramasubramanium tagged the matter with the aforementioned pleas which are to be taken up on June 12.

On May 15, a bench of Justices L. Nageswara Rao, Sanjay Kishan Kaul and BR Gavai had issued notice on the plea after hearing Senior Advocate Harish Salve's submissions who was appearing for The Confederation of Real Estate Developers' Associations of India (CREDAI).



On the last date, Solicitor General Tushar Mehta had informed the bench that he would  take instructions from RBI, SEBI and the Finance Ministry. 

In light of the same, the Bench directed the SG to come back with complete clarity on the matter.

Background:

On March 27, in wake of the COVID-19 pandemic and the consequent national lockdown, the RBI had issued a Circular, giving liberty to all banks to allow a moratorium period of three months on payment of instalments with regard to all term loans which were outstanding as on Match 1, subject to the borrower making such a request.

Salve had submitted that was an entitlement to moratorium in terms of the aforementioned Circular and that some banks were refusing to give the benefit.

While delving on conjectures, Salve had submitted that,



"The real problem lies with what is happening with RBI. When the matter came to Court, RBI said that the Circular was binding. But, some banks were not giving the benefit. While the RBI reply says that it is the discretion of the bank, the RBI Governor's speech said that it was binding".

Further to this, Salve had also acknowledged that the new financial package that was recently announced by the Finance Minister Nirmala Sitharaman might resolve the issue.

A plea had also been filed before the Delhi High Court regarding the applicability of the Circular to NBFCs like Indiabulls Commercial Credit Ltd. (ICCL). Justice Rekha Palli had directed the state-run Small Industrial Development Bank of India (SIDBI) to clarify the same before demanding further loan instalment from ICCL.