Restrain Banks From Declaring Defaulting Loan Accounts As NPA: Petition In SC

What is the case

• A Public Interest Litigation has been filed in the Supreme Court, asking the Union of India and the Reserve Bank of India to allow banks to offer borrowers a payment moratorium from June to August, and to issue a notification to all banks not to classify any loan account as NPA for non-payment of EMI from April to August at the very least.
• Distress Management Collective, an NGO Trust based in Delhi-NCR, filed the PIL through Advocate Jose Abraham.
• The petitioner organisation, according to the PIL, has received requests to petition the Supreme Court from a large number of persons who fall into the middle class and have taken out a bank loan. The main complaint of this group is that they have had a difficult time paying their EMIs since the start of the second wave of Covid-19, especially due to the state-by-state lockdowns, which have now lasted over a month.

Details

• There are news stories that claim Covid-19 is forcing India's middle class into poverty. According to a Pew Research Center analysis, the pandemic pushed 32 million people into poverty last year.
• Since the last one and a half month, the weekly extension of lockdowns has resulted in more people from the middle class losing their employment, and those who do have work are facing the threat of significant compensation cutbacks.
• The Petitioner group has also learned from legal professionals that many of their colleagues are seriously impacted by the pain of Covid-19, according to the Petition.
• Since March 25, 2020, a large number of lawyers have relocated from cities to their hometowns, which is a sad reality. It's also common knowledge that since Covid-19 hit the country, the pace of activity in courts has decreased. And this has had an impact on lawyers who are relatively successful or who are part of the first generation of young lawyers.
• The second wave of the pandemic has also thrown the small and medium enterprise (SME) sector for a loop. The second wave of the Covid-19 arrived just as the sector was beginning to recover from the first wave's blow, according to the Petitioner.

The Public Interest Litigation

• The PIL emphasised that the ongoing lengthy lockdown enforced by states such as Maharashtra, Delhi, Rajasthan, Madhya Pradesh, Karnataka, West Bengal, Tamil Nadu, and Kerala has been extremely harsh, sapping the hopes of the afflicted daily wage earners for a revival.
• The Reserve Bank of India granted a respite of the moratorium for three months on March 27, 2020, which was then extended to six months until August 31, 2020, on May 23, 2020, when the situation was not as bad as it is now in the continuing second wave. On August 6, 2020, the RBI made a debt restructuring facility available.
• The NGO argued that the time has come to support all borrowers, whether they are individuals or small businesses, who fall under the SME sector's umbrella, especially in light of the fact that the second wave of Covid-19 has had a far greater impact on people's lives and livelihoods. In view of the predicament of a large number of debtors, a resolution plan for loan restructuring is insufficient.
• On May 28, 2021, the Petitioner sent a representation to the Respondent no.1 (Union of India), requesting that Respondent no.2 allow banks to offer EMI payment moratoriums from June to August, and to not classify any loan account as NPA for non-payment of EMI from April to August at the very least, as the one-time restructuring scheme is likely to be invoked.
• As a result, a moratorium for the aforementioned period will allow borrowers to keep their accounts in good standing, and a financial package aimed primarily at the most badly affected while bearing in mind the possibility of a third wave is also required.

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