RBI warns SC for restricting plea seeking on a waiver of 6 months moratorium
On 27 March, RBI warned the Supreme Court for restricting plea seeking a waiver of interest for the 6 month moratorium period on loan repayments, ending on August 31. The RBI also presented the estimation for forced waiver of interest and firmly stated that this will disturb financial stability and will affect about 1% of the GDP.
The central bank gave a reasonable argument that banks must ensure profitability and safety to depositors and maintain the financial stability of the country. RBI in turn stated the importance of interest rate as a basic source of income for banks.RBI further clarified that the borrowing or a loan is a commercial contract between the lender and borrowers, However, Central bank objected to the benefits of an interest waiver which are enjoyed by borrowers and are not be transferred to banks.
RBI assured that the constraints caused by the lockdown were the reason behind extension of the moratorium to six months, ending on August 31 instead of May 31. The RBI also clarifies that availing benefits under the scheme are designed as per the lenders’ policies and eligibility of customers, on-boarding of customers, and manner of interest recovery can be managed as per the banks and financial institutions.