SC to Hear on Wednesday Batch of Pleas on Loan Moratorium

The Reserve Bank of India (RBI) filed an affidavit in the apex court recently saying that loan moratorium exceeding six months might result in vitiating the overall credit discipline, which will have a debilitating impact on the process of credit creation in the economy. Separately, the Centre has also filed an affidavit saying that going any further than the fiscal policy decisions already taken, such as waiver of compound interest charged on loans of up to Rs 2 crore for six months moratorium period, may be “detrimental” to the overall economic scenario, the national economy and banks may not take “inevitable financial constraints”.

These affidavits were filed following the top court’s October 5 order asking them to place on record the K V Kamath committee recommendations on debt restructuring because of the COVID-19 related stress on various sectors as well as the notifications and circulars issued so far on loan moratorium. In its affidavit, the RBI has said that any waiver of interest on interest would entail significant economic costs which cannot be absorbed by the banks without serious dent of their finances, and this, in turn, would have huge implications for the depositors and the broader financial stability.