SC Loan Moratorium Case: Centre Warns Against Interest Waiver

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The SC on December 8, 2020 resumed its hearing on extension of loan moratorium case. In view of the pandemic which has affected the finances of individuals due to business disruption, salary cuts and job loss, allowed 3-months moratorium on repayment of term loans. And this was extended by another 3-months to August 31.

Also, there was a relaxation that no account shall be declared as Non-performing assets or NPA. Further as per the RBI circular, there was suggested that on the deferred EMI, interest will be levied and it is this interest implication that is being contested for in the apex court.

On the interest waiver issue, the government says that if interest on all of the loan types is waived, it will amount to more than Rs. 6 trillion. And this shall wipe out a major portion of banks’ net worth and this in the case of SBI would mean erosion of as much as half of net worth of the bank.

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