The government has told the Supreme Court that it is ready to waive interest on the repayment of loans of up to Rs 2 crore, frozen by the Reserve Bank of India (RBI) in a six-month RBI loan moratorium granted because of the coronavirus pandemic.
The interest waiver will be applicable for RBI loans taken by MSMEs (Micro, Small and Medium Enterprises), for educational, housing, consumer goods and auto loans and for credit card dues. Whereas, the Finance Ministry has said waiving off interest on loans to every category would amount to a burden of Rs 6 lakh crore for banks.
Affidavit by Centre in SC
The decision has come in an affidavit filed by the Centre which says,
“If the Banks were to bear this burden, it would necessarily wipe out a substantial and a major part of their net worth, rendering most of the Banks unviable and raising a very serious question mark over their survival.”
It is added that it is impossible for the banks to bear this burden without passing on the financial implications on to their depositors or affecting their net worth, neither of which is in larger public interest.
“The only solution, is that government bear the burden resulting from waiver if compound interest. This Hon’ble Court would be satisfied that the government bearing this burden would naturally have an impact on several other pressing commitments being faced by the nation including meeting direct costs associated with pandemic management addressing basic needs of the common and mitigating the common man’s problems arising out of loss of livelihood.”
The ministry said it had decided to help a certain class of borrowersof RBI loan during the unprecedented situation that the country was facing.
The matter will be taken up next on October 5 regarding RBI loan Moratorium.