The government has reportedly told the Supreme Court that it is ready to waive interest on the repayment of loans of up to ₹ 2 crore, frozen by the Reserve Bank of India (RBI) in a six-month moratorium granted because of the coronavirus pandemic.
The interest waiver will apply for loans taken by MSMEs (Micro, Small and Medium Enterprises), for educational, housing, consumer goods and auto loans and for credit card dues.
“Under pandemic conditions, the only solution is for the government to bear the burden of waiving of interest,” the government has said in an affidavit submitted on Friday, adding that it will seek parliament’s permission for grants to enable the move.
For the categories specified by the government, the waiver on interest will be irrespective of whether the borrower has availed of the moratorium.
But the Finance Ministry says waiving off interest on loans to every category would amount to a burden of ₹ 6 lakh crore for banks.
If the banks were to bear this burden, it would necessarily wipe out a major part of their net worth, rendering most of the banks unviable and raising a very serious question mark on their survival, it says.
The ministry said it had decided to help a certain class of borrowers during the unprecedented situation that the country was facing.
The case will be heard up again on Monday.
The government’s decision is a change from its earlier decision to say no to any interest waiver as it would affect banks. The change of stance is based on the recommendation of a government panel headed by former Comptroller and Auditor General Rajiv Mehrishi, which was tasked with examining the effects of the coronavirus and the lockdown on various sectors.
