The government during a hearing on loan waiver interest case on Friday told the Supreme Court that it'll discuss the issue with Reserve Bank of India and that a meeting in comprising all stakeholders will be held soon. The SC asked the government to finally decide in three days whether interest on EMIs during six month moratorium period till August 31 will be charged by banks or not.
Deferring the case to June 17, the apex court said it was trying to do a "balancing act". "Our concern in these proceedings is only whether the interest that has been deferred for three months will be added to charges payable later and whether there will be interest on interest," it said.
Meanwhile, state-owned State Bank of India, which moved an intervention plea in the Supreme Court against the allowance of interest waiver, said it was not a feasible option.
The RBI in an affidavit filed before the Supreme Court has already 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 also 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.
Like banks, NBFCs have also granted loan moratorium to borrowers. Any decision by the government and the RBI will also have direct impact on NBFCs as they will also seek a waiver on interest.
The RBI in May extended the moratorium on payment of all term loans by another three months till August 31. Before that, the central bank had allowed a three-month moratorium on payment of all term loans due between March 1 and May 31. 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.
Also read: Rs 2 lakh crore blow to banks if interest during loan moratorium waived, RBI cautions SC