In a fresh affidavit, the Reserve Bank of India said that it is not possible to give more relief to sectors impacted by the coronavirus pandemic. The affidavit filed by the Centre and the RBI in connection with the loan moratorium case stated that it is not possible to extend the loan moratorium period beyond six months.
The RBI said that a loan moratorium exceeding six months would vitiate the overall credit discipline that would have a debilitating impact on the process of credit creation. It also argued that the move could increase "risks of delinquencies post resumption of scheduled payments" and "exacerbate the repayment pressures for the borrowers".
The response came after the apex court said that the government's previous affidavit on waiving 'interest on interest' on loans of up to Rs 2 crore during the pandemic period was 'not satisfactory'. In the latest affidavit the RBI and the government have said that policy is the domain of the government and the court should not go into sector-specific financial relief. "Any further relief, besides waiving of compound interest for loans up to Rs 2 crore, is detrimental to the national economy and banking sector," stated the government.
Talking about sector-specific reliefs, the RBI said that real estate and power sectors were already stressed before the COVID-19 pandemic. It added that "travails of real sector cannot be solved through banking regulations". This was said in response to the apex court's order to consider the concerns of real estate sector and the power sector in the fresh affidavit.
The affidavit states that the only solution is for lending institutions and borrowers to formulate restructuring plans without the interference of Centre and RBI. The affidavit further underlines that "as per Kamat Committee report it is not possible to arrive at one particular formula for sector specific relief to deal with pandemic".
The next hearing is scheduled for October 13.