Almost all industries in the country are suffering due to COVID-19 pandemic but it is not a wise decision to put all kinds of loan and contractual transactions under the moratorium (suspension of an activity), the Securities and Exchange Board of India (SEBI) has told the Supreme Court.
SEBI has filed an affidavit in the apex court seeking clarification on whether the RBI’s circular regarding the moratorium on loan repayment during the pandemic applies to Non-Banking Financial Corporations (NBFCs) and whether real estate firms are eligible for it.
The affidavit filed by SEBI said that not only the real estate sector but almost all the industrial sectors in India have been suffering due to pandemic COVID-19 and as a result of this, it does not mean that all kinds of loan and contractual transactions are to be put to under moratorium. SEBI said that a plea filed by an association of real estate developers that was dismissed appears to be “proxy litigation” where the petitioners have raised grievances and issues relating to NBFCs and Housing Finance Corporations (HFCs) rather than coming up with problems and grievances faced by their members.
SEBI said that there is no restriction upon the real estate Industry to receive and recover money from their customers during the lockdown. SEBI said that on May 13, this year the Ministry of Housing and Urban Affairs had issued an advisory to the respective state governments to extend the deadline for completion of real estate projects which has been delayed due to COVID-19 and also for various statutory compliances under the provisions of Real Estate (Regulation and Development) Act, 2016. This advisory is very beneficial for the real estate developers as there will be an extension of six months for the completion of the project with a further option of three months extension if needed.
The affidavit said that there cannot be a comparison between benefit granted to one section of the society with the other one as these are need-based reliefs. It also said that the authorities of various sectors of the industry are preparing various relief schemes because of the unprecedented situation that has arisen due to COVID-19. The apex court on May 15 issued notices to the Centre, RBI, SEBI, and others seeking their opinion on the plea. While hearing separate pleas, the court had asked the RBI to ensure that its circular on the three-month moratorium on loan repayment between March 1 and May 31 is implemented properly as it appeared that many banks were not extending this benefit to the borrowers. But interest will continue to accrue on the outstanding portion of term loans during the moratorium period.
As most of the citizens of the country are facing salary cuts and unemployment during this pandemic, the moratorium period will provide the ones that are struggling to repay their loans with little relief.
