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Banks to ask Centre’s help to fund interest waivers: Report

The government, in October 2020, had announced a waiver of compound interest only on loans of up to Rs 2 crore.

March 25, 2021 / 09:46 AM IST
The Reserve Bank of India, on March 27, 2020  announced a moratorium on loan instalments due between March 1 and May 31.

The Reserve Bank of India, on March 27, 2020 announced a moratorium on loan instalments due between March 1 and May 31.


Banks are planning to seek the government's help to pick up the tab on an estimated amount of Rs 7,500 crores of compound interest waiver, said Mint in a report. This comes after the Supreme Court order on loan moratorium.

The report further said that paying from their pockets could dent the profitability of banks, citing a person aware of the development. "While we will request the government to pay for this round as well, I don’t think the bill will be too high. Lenders will take it up with the Indian Banks’ Association (IBA) at the next managing committee meeting soon enough," said the person mentioned above.

Moneycontrol could not independently verify the report.

The apex court, on March 23, pronounced its judgment on a batch of pleas related to the six-month loan moratorium period, stating that it cannot allow waiver of complete interest and extension of the moratorium.

It further ruled that there shall be no interest on interest or compensation interest during the moratorium period for all borrowers, irrespective of the loan amount. If any such amount has been collected it shall be refunded.

Close

The government, in October 2020, had announced a waiver of compound interest only on loans of up to Rs 2 crore. The waiver was for the months from March to August as the pandemic induced lockdown had affected earnings and led to job losses.

The Reserve Bank of India, on March 27, 2020 announced a moratorium on loan instalments due between March 1 and May 31. The moratorium period was later extended by three months till August 31, 2020.

The government had also informed the top court in October that it is impossible for banks to bear the burden resulting from waiver of compound interest without passing on the financial impact to depositors or affecting their net worth adversely.
Moneycontrol News
first published: Mar 25, 2021 09:46 am

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