Supreme Court turns down PIL demanding fresh loan moratorium

The Supreme Court has turned down public interest litigation (PIL) asking for a fresh moratorium on loan repayments considering the ongoing second wave of Covid-19. The top court pointed out that it is up to the government to assess the situation and pass a suitable order.

In April 2021, the Reserve Bank of India reopened its one-time loan restructuring plan for individuals and small-time businesses suffering due to state-wise lockdowns. RBI Governor Shaktikanta Das pointed out that individual borrowers, small businesses, and MSMSEs are the most vulnerable in the new environment.

After considering the petition, the Supreme Court said that the issues mentioned in it are in the category of policy decisions. Hence the government can issue a legal authorization to postpone payment.

Micro, small and medium enterprises (MSMEs) with exposure of up to Rs. 25 crore were eligible for loan restructuring in the second round. Governor Das said that the restructuring under the proposed framework may be invoked up to September 30, and it should be implemented within three months.

He had said in a speech last month that the second wave of Covid-19 in India and containment measures at regional levels have led to the creation of new uncertainties in the country's market. He added that it affected the economic revival that was taking shape.

The RBI had taken a similar step a year ago as well. At the beginning of the Covid-19 outbreak, the RBI had announced a moratorium on loan repayments following the government order to impose a nationwide lockdown. The authorisation for debtors to postpone payments included all term loans including home, auto, and crop loans.