Given how over the years the higher judiciary had expanded its remit using the device of Public Interest Litigation, an open admission by the highest court in the land that it lacked expertise in quite a few areas and, therefore, would refrain from directing policy-formation would indeed be music to the ears of the political and permanent executive which often has been often on the receiving end of PIL-inspired judicial interventions.
A bench of Justices Ashok Bhushan, R S Reddy and M R Shah while rejecting a plea for extending the pandemic-induced package of last year, plainly conceded that these are matters to be ‘decided by the government and RBI on the aid and advice of the experts’. The open confession about limitations to judges’ professional expertise and skills ought to have wider implications for the judiciary.
Once, the novel instrument of PIL was used to champion lost causes or to highlight abuses of human rights of the poor and the under-privileged, but over the years it became a tool in the hands of vested interests who misused PILs to settle personal scores or to extract benefits from governments. Even blackmail and intimidation through PIL was not unknown, especially when a crop of lawyers attained notoriety for filing PILs either for self-glorification or other extraneous reasons.
Justice Bhushan correctly said the court shall not fear to intervene in such matters should there be a suspicion of mala-fide or illegality in policy formation but otherwise it would maintain a hands-off approach, leaving the policy domain to the executive and the legislature. Following its own cardinal principle, the bench while declining to extend the loan moratorium period and a total loan waiver on interest payments, however saw no merit in restricting the compound interest benefit in the moratorium period to loans up to Rs 2 crore only.
The court directed that if the banks had recovered compound interest in the six-month moratorium period last year it ought to be refunded or adjusted in future instalments. The government had opposed the benefit for loans above Rs 2 crore, arguing extending the interest waiver even for six months on all loans would tot up Rs 6 lakh crore, a huge sum which would pressure the bottom-line of the entire banking sector already reeling under the deadweight of mounting non-performing assets.
With the uncertainty over the waiver now lifted by the SC, it would help the RBI to assess the impact of the pandemic on the banking industry. It is feared a fresh assessment of the loan-accounts of banks would result in a huge jump in bad loans. Without doubt, a lot of borrowers incurred losses due to the pandemic, but even after the slow restart of the economy many businesses are still to get back to pre-pandemic normal while even those who were doing well were keen on an extended moratorium on interest for obvious reasons.
But it will be unfair to expect the banks to write off interest given it would impact their capacity to service the depositors as also to remain solvent. As per one estimate, the reclassification of loans might result in the NPAs doubling to nearly 14 per cent later this year. There are limits to RBI’s capacity to recapitalise the banks. As it is, in the last couple of years small loans to micro-small and mid-level businesses are burning a big hole in the banks’ books since a huge percentage of such borrowers show no inclination to pay back.