Waiving Interest Impossible: SC Won't Extend Loan Moratorium

Supreme Court took a major decision on Tuesday in which they announced that the court will not be interfering with the Centre and RBI's loan moratorium policy. Furthermore, they refused to extend the six-month moratorium period. The court said that waiving interests on all the loans cannot be done. This decision will concern the depositors.

The verdict was being announced by a bench that was headed by Justice Ashok Bhushan. They took up various concerns and appeals raised by trade unions. It also included the extension of the loan moratorium in view of the pandemic. Justice M R Shah said that the Reserve Bank of India (RBI) and the government took various decisions. They must’ve addressed the borrowers as well.

The centre explained to the Supreme Court why they couldn’t take such a decision. It was revealed that it would lead to a huge loss. If the centre decided to waive off interests on all the loans and its categories of borrowers for the six-month moratorium period, then it would mean losing 6 lakh crore. The announcement to waiver the loan interest was made by RBI in the wake of the pandemic.

It was further explained that the banks cannot take this on them. This will be a burden that affects their net worth. So, even the banks could not go through with this. They gave an example of the State Bank of India (SBI) and shared that, if SBI alone also decides to go ahead with this plan, they will be erasing half of the net worth. Six months of the waiver on interest means erasing half of their total net worth.

The government shared that due to all these reasons, they didn’t go ahead with the waiver of interest plan. There were other measures taken instead, including broadcasted emergency credit-linked guarantee scheme (ECLGS) of Rs 3 lakh crore. Due to the COVID19 pandemic, the centre and RBI decided on other measures as well.