Bank shouldn't declare Accounts as NPAs until disposal of pleas seeking Moratorium extension: SC

On Thursday, the Apex Court directed that the bank accounts should not be declared as a non-performing asset (NPA) as on 31 Aug should not be declared as NPAs until the disposal of the pleas seeking an extension of the moratorium period.

A 3-Judge bench, headed by Justice Ashok Bhushan, was hearing 2 pleas seeking an extension of the moratorium period on repayment of loans & to waive off the interest on the repayment of the loan amount in view of the Coronavirus pandemic.

Solicitor General Tushar Mehta, appearing for the Central Govt, said that the banking sector is the backbone of India's economy & that the Govt cannot take any decision which can weaken the economy.

Mehta said that "We have decided not to waive interest, but reduce payment pressure".

Lawyer Vishal Tiwari, who is one of the petitioners, asked whether three months time period till Nov 1 will be given to borrowers to approach the banks for rescheduling or restructuring after Aug 31.

Tiwari also asked if EMI's will be deferred & whether no action will be there in default.

After hearing arguments from all the parties in the matter, the bench passed an order not to declare accounts as NPAs until the disposal of the petitions in the matter.

Earlier, the Central Govt had submitted that the loan moratorium period may get extended by up to 2 years in view of the ongoing COVID-19 pandemic. It had also said that writing off interest will weaken banks & economic conditions.

The Reserve Bank of India (RBI) had, in its notification dated March 27, granted a three-month moratorium period on monthly loan installment, & extended the same on May 23, for another three months till Aug 31, 2020, in view of the economic impact of the COVID-19 pandemic

The Supreme Court was hearing 2 petitions filed by Gajender Sharma & lawyer Vishal Tiwari, seeking directions to extend the moratorium period to help borrowers in deferring their EMI payment on term loans & for waiver of interest on the loan repayment during the moratorium. 

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