Center tells Supreme Court: “Interest Waiver For All Costs 6 Lakh Crore Of Loss”December 09, 2020 12:36
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Interest waiver for 6 month moratorium can collapse the banking system, says center to Supreme Court. It waiver on all loans can lead to a loss of 6 lakh crore for banks and financial institutions.
Previously, the court ordered the center to cancel the charges on loans for the 6 month moratorium period. On Tuesday, Center told Supreme Court that the waiver of interest on all loans can cause over 6 lakh crore loss which has earned for 65 years of existence.
The Supreme Court has been receiving various pleas from various sectors like real estate, power seeking sector wise relief in the view of COVID-19 pandemic.
If the court urges the banks to take all the burden then major of the their net worth will be at loss. This is raising a big question mark for the banks over their survival. The center said, “This was one of the main reasons why waiver of interest was not even contemplated and only payment of installments was deferred”.
Center also told that the waiver of six months will cut off half of the net worth of State Bank of India which is the country’s biggest bank. The banks find it even more difficult as the burden of interest waiver without passing it to the depositors. This will ultimately affect their net worth, said the center.
Government to bear the financial burden of the interest waiver of entire period of moratorium. But it is applicable for the specific category of borrowers which is the only solution under the present circumstances. This decision will impact the direct costs that is linked to pandemic management, health sector, common man basic needs, according the center.
Hence, the government decided to approve the relief on waiver of compound interest during the six month moratorium which will be confined only to the most vulnerable categories. The inclusive categories are MSME loans and personal loans up to Rs.2 crore.
After this decision from government, hearing from SC is yet to come and would resume on Wednesday.
By Ramya C