Plea Seeking Extension of The Benefits Of RBI Circular on Loan Moratorium To All NBFCs: SC Issues Notice

The Supreme Court has issued notice to the Centre and Reserve Bank of India in a plea by The Confederation of Real Estate Developers' Associations of India (CREDAI) which sought for clarification regarding whether all NBFCs were eligible for loan moratorium or whether banks had the discretion to give the benefit. 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. 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. In the instant plea before the Supreme Court, Senior Advocate Harish Salve, appearing for CREDAI, submitted to a Bench of Justices L. Nageswara Rao, Sanjay Kishan Kaul and BR Gavai, that there was an entitlement to moratorium in terms of the Circular issued by RBI and some banks were refusing to give the benefit. "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". Salve further submitted the predicament of the NBFCs as they had large loans, but the banks were refusing to give them the relief. "The deferment of loan, we have members of our community who are in the real estate agency. We only want the RBI to clarify this, to clarify whether this is binding or not binding, whether they will give or not give". Salve acknowledged that the new financial package that was recently announced by the Finance Minister Nirmala Sitharaman might resolve the issue. Solicitor-General Tushar Mehta informed the Bench that he would accordingly 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 and issued notice. The matter will now be listed after two weeks.

Plea Seeking Extension of The Benefits Of RBI Circular on Loan Moratorium To All NBFCs: SC Issues Notice

Radhika Roy

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