Debt relief only through restructuring, not interest waiver: IBA

Indian Banks’ Association (IBA) on Wednesday told the Supreme Court that any resolution of debts can be through restructuring only and private banks can deal with it in line with their respective norms. However, it ruled out any writing off interests on loans given by the PSU banks, stating they are listed companies having shareholders.

Senior advocate Harish Salve, appearing for the IBA, told a Bench led by Justice Ashok Bhushan that any relief which banks would give might be based on the guidelines issued by the RBI and the government from time to time.

While requesting the court to close the case, the senior counsel said the government had to balance equities of those adversely affected and could not focus on a few sectors alone.

While opposing the grant of any more sector-specific loan repayment reliefs other than those that have already been declared, IBA stated that any relief granted to anyone under disaster relief laws in India was meant for those directly affected by it and the same principle should be applied while granting any relief from repaying loans as well. “Disaster relief measures are for only the “Tier-I” or those bearing immediate impact of the disaster,” it said.

Salve also argued that various sectors like real estate were already ailing and “doing horribly for a long time” and stating that they were Covid-affected was not correct. These sectors claiming relief under disaster relief laws beat the purpose of these laws itself, he said, adding that the courts usually take up the cause for those whose voices cannot be heard. Real estate sector, however, does not qualify as “voiceless”.

“This court has an application from CREDAI. Have they placed any materials on which one can identify how wobbly was their house before the pandemic. Nothing,” Salve said.

According to IBA, the National Disaster Relief Act and other such laws define “disaster-affected” as directly affected by disaster and not subsequently affected or a situation where someone’s conditions were worsened by the disaster.

Senior advocate Mukul Rohatgi, appearing for SBI, told the SC that “small depositors are faceless in these proceedings. It is not a case of borrowers versus bank. They are the backbone of this financial system. There was waiver and only deferment of installment. Banks have to give interest to these depositors. How can we leave them?”

The apex court will continue to hear the case on Thursday.