No clear formula for resolving financial burden caused by COVID-19 is feasible or desirable: Center
The Centre notes that decisions on the handling of financial tension must be made through a systematic process, and these questions cannot be judged by the judicial authority under Article 32.
The Centre has told the Supreme Court in the loan moratorium case that matters relating to the management of financial tension and the effect of decisions on different Financial Criteria are not suitable for a judicial decision.
The petitioners and interveners do not pose any legal concerns when requesting sector-specific relief in the area of debt restructuring and interest waivers, but are clearly calling for relief from the "additional financial support from the government or regulatory forebearance from RBI and other regulators" the declaration filed by Centre-States.
While the complaints of borrowers are resolved by all the action, schemes initiated and by the government and the Reserve Bank of India (RBI) regulatory system, the petitioners cannot seek sector-specific relief, the Center argues.
More so, considering that fiscal decisions taken by the Finance Ministry follow a specific procedure in view of the huge financial impact they have.
This aspect, as such, cannot be judicially decided or be subjected to judicial review, the Centre avers. The affidavit states,
"The petitioners/interveners cannot pray for sector specific relief of either waiver or restructuring by way of present proceedings under Article 32 of the Constitution of India as the question of such financial stress management measures require examination and consideration of several financial parameters and its impact and are not suited for being judicially decided or be subjected to judicial review."
The Centre's reply follows on from the Supreme Court, on 5 October, that more affidavits were sought which detail the measures taken to address the debtors' concerns regarding the interest waiver during the moratorium. The Court also ordered borrowers to document the Kamath Committee report, which deals with the sectoral relief for COVID-19 related stress.
File additional affidavits on sectoral relief; place Kamath Committee report on record: Supreme Court to Centre, RBI
The banking regulator pointed out in the affidavit filed by the RBI the possible detriment of continuing the moratorium on loans after six months. It also calls on the Court to lift its stay in order to prohibit banks from automatically classifying any credit accounts as NPAs.
The RBI further underlines the numerous steps and schemes implemented by the Centre for troubled industries faced with structural problems and the business of the Centre, for the moratorium, to bear the brunt of the economic costs of exempting small creditors from the compound interest.
Spreading the moratorium beyond six unrealistic months would vitiate the discipline of credit and raise crime: RBI to the Supreme Court
The fresh statement from the Centre, which complements the RBIs, highlights the steps it takes to alleviate the pandemic's financial burden, as well as the steps taken by the RBI to create a moratorium first and later restructure of the credit.
The affidavit of the Centre also discusses the number of AtmaNirbhar schemes for managing disadvantaged sectors such as the power industry, the real estate sector and micro, small and medium-sized enterprises (MSME).
The Centre emphasises the RBI circular of 6 August which provides for a restructuring loan which helps the lenders, in compliance with the unique circumstances of each borrower, to render personalised relief for borrowers.
The Kamath Committee's report made guidelines for the large borrowers while this circular deals with the small borrowers, describing 26 sector categories. The study lays down the guidelines for credit institutions to enforce the mediation process which, after reviewing various considerations, can be performed on a case-by - case basis, the affidavit states.
The Centre also enumerates the stimulus packages introduced for various classes of borrowers and submits that going beyond the steps already taken would result in severe detriment to the financial and economic scenario. "National economy or the banking sector may not be able to take the inevitable financial constraints resulting therefrom", the Centre's affidavit states.
The Centre therefore asks the Tribunal to note all the actions taken by all concerned parties that have successfully served their obligations and, in this case, to refrain from the judicial review of the litigants' asks for rulings.
The Supreme Court has scheduled hearing of the case next week.