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Interest waiver to cost banks Rs 6 lakh crore: Centre tells Supreme Court

The Centre informed the Supreme Court on Tuesday that if it were to consider waiving interest on all the loans and advances to all categories of borrowers for the six-month moratorium period announced by RBI in view of COVID-19 pandemic, then the amount foregone would be more than Rs. 6 lakh crores. If the banks were to bear this burden, then it would necessarily wipe out a substantial and a major part of their net worth, rendering most of the lenders unviable and raising a very serious question mark over their very survival.

The Supreme Court bench of Justices Ashok Bhushan, R S Reddy and M R Shah was informed by Solicitor General Tushar Mehta, appearing for the Centre, that this was one of the main reasons why waiver of interest was not even contemplated and only payment of instalments was deferred. The apex Court is hearing a batch of pleas of various bodies including from real estate and power-seeking sector wise relief in view of the COVID-19 pandemic.

If the interest is waived on all the loans and advances for the moratorium period, with regard to all classes and categories of borrowers, the amount to be foregone would be more than Rs 6 lakh crore, Tushar Mehta said that

Government were to consider waiving interest on all the loans and advances to all classes and categories of borrowers corresponding to the six-month period for which the moratorium (deferment of payment of instalment) was made available under the relevant RBI circulars.

Customising the reliefs to individual borrowers can never be done either by the Ministry of Finance or by the RBI as it involves crores of borrowers and therefore, it can be done only by respective lenders, Tushar Mehta added.

He said that so far as big borrowers are concerned, the RBI appointed an expert committee under the Chairmanship of K V Kamath which segregated various sector borrowers into 26 categories and gave parameters within which banks were directed to restructure the accounts.

Various steps are taken by different ministers under the Disaster Management Act, as against the wrong notion of petitions that functions of all ministers are to be discharged by the National Disaster Management Authority (NDMA), he also added.

So far as the economic impact of the present disaster is concerned, it is essentially the function of the Ministry of Finance and RBI to take measures under Section 36 of the Act and the question of NDMA stepping in would not arise, his written submission said.

The daylong hearing conducted through video conferencing would continue today on 9 December 2020.

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