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Rs 2 lakh crore blow to banks if interest during loan moratorium waived, RBI cautions SC

The RBI filed the affidavit, responding to a court notice on a public interest litigation (PIL) seeking direction from the SC to waive the interest on loans during the moratorium period in the wake of COVID-19 crisis

twitter-logoBusinessToday.In | June 4, 2020 | Updated 09:42 IST
Rs 2 lakh crore blow to banks if interest during loan moratorium waived, RBI cautions SC
The RBI clarified to the Supreme Court that the moratorium period extension was only a deferral, not a waiver on loan repayments

The Reserve Bank of India (RBI) in an affidavit filed before the Supreme Court on Wednesday has informed it that it cannot waive interest on loans for the six-month moratorium period, as it would jeopardise the financial stability and health of the banking sector.

The apex bank told the court that it assessed the interest payable on these loans to be approximately Rs 2 lakh crore, which it would lose if it forgoes the interest amount on loan repayments.

The RBI clarified to the top court that the moratorium period extension was only a deferral, not a waiver on loan repayments.

Also Read: Interest or Interest-free? SC asks Centre, RBI on EMI moratorium

SC will hear the matter on June 5, Friday, news agency ANI reported.

The RBI filed the affidavit, responding to a court notice on a public interest litigation (PIL) seeking direction from the SC to waive the interest on loans during the moratorium period in the wake of COVID-19 crisis.

The RBI had on March 27 issued a circular permitting banks to grant a three-month moratorium to borrowers, giving them the option to defer their EMI payments.

The decision was announced following Centre's directions to the apex bank to ease the financial burden on the debtors in the wake of coronavirus-induced lockdown.

The moratorium period was further extended on May 22, making it a six-month moratorium.

Also Read:Coronavirus lockdown 4.0: Should RBI extend loan moratorium beyond May 31?

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